Pound to Euro Exchange Rate Slips but Avoids Major Losses on Brexit Developments
A lack of solid shifts in Euro (EUR) demand has not prevented it from edging higher against Sterling (GBP) this morning, as Pound to Euro (GBP/EUR) exchange rate investors digested the weekend’s Brexit developments.
Last week was a highly tumultuous week for the Pound. GBP/EUR opened the week at the level of 1.1463 and ultimately gained around a cent and a half on surprise Brexit developments, closing the week at around 1.1618.
This morning, the pair fell as the weekend’s news caused investors to fear that a worst-case scenario no-deal Brexit had become more likely again.
However, the pair’s losses have been limited due to hopes that the Brexit process was more likely to be delayed. At the time of writing, GBP/EUR trended near the level of 1.1585.
Pound (GBP) Exchange Rate Rally Interrupted amid Brexit Delay Jitters
On Saturday, UK Parliament voted in favour of the controversial Letwin amendment.
This amendment, from former Conservative MP turned Independent Oliver Letwin, has forced the UK government to ask the EU for an extension to Brexit after pushing the government’s meaningful vote on its new Brexit deal into this week.
Markets became anxious that due to the government’s attempts to find a loophole to prevent a fresh Brexit delay, a no-deal Brexit was still possible.
However, analysts believe a no-deal Brexit has become less likely overall. According to Adam Cole, Chief Currency Strategist at RBC Capital Markets in London:
‘The weekend’s events, if anything, have further reduced the risk of disorderly exit,
If there is a knee-jerk negative reaction in the Pound as we emerge from the weekend with a greater overhang of uncertainty than hoped and some of the long positions are unwound, it should be faded soon.’
There are also market hopes that the newly reached Brexit deal could still be passed in the coming days, keeping Sterling buoyed.
Euro (EUR) Exchange Rates See Limited Demand amid Lack of Eurozone Support
The Pound to Euro (GBP/EUR) exchange rate’s resilience has been due to Brexit hopes, but also in part due to a lack of solid support for the Euro.
Last week’s Eurozone data continued to show that the bloc’s economy was still enduring a long slowdown.
While seemingly improving Brexit and US-China trade outlooks have helped to boost hopes that the global growth outlook is finally calming, there has been overall little reason for investors to buy the Euro aside from rival weakness.
With the Pound climbing, the Euro’s weakest rival has been the US Dollar (USD) which the Euro often sees a negative correlation with. The US Dollar (USD) has been weak on concerns that the US economy could be slowly headed towards recession.
Pound to Euro (GBP/EUR) Exchange Rate Could Climb if Brexit Vote Succeeds
Speculation that UK Prime Minister Boris Johnson’s Brexit deal could successfully pass through parliament soon is keeping the Pound buoyant today.
Fresh reports this morning have even caused speculation that Johnson has the support he needs to pass the deal.
The government hopes to hold a meaningful vote on its Brexit deal today. If the deal does pass, the Pound could rocket as no-deal Brexit fears would fade and be replaced with softer Brexit relief.
However, if the Brexit deal is blocked, the Pound will remain volatile and jittery as parliament will continue in attempts to force the government to ask for another delay to the Brexit process.
Brexit news is likely to dominate market movement this week, as this could be the week in which the fate of the process, or the currency phase of it at least, is finally decided.
As a result, Pound to Euro (GBP/EUR) exchange rate investors may largely overlook Eurozone data until Markit’s PMI projections are published on Thursday.