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UK Data and Brexit Hopes Cause Euro to Pound Sterling Exchange Rate to Shed August Gains

Euro to Pound Exchange Rate Tumbles despite Lingering No-Deal Brexit Fears

While markets remain highly anxious about the possibility of a no-deal Brexit happening in October, a rise in hopes that no-deal Brexit could be prevented knocked the Euro to Pound Sterling (EUR/GBP) exchange rate from its best levels last week.

On the 10th of August, EUR/GBP touched on a decade high of 0.9392. However, last week the Pound (GBP) was buoyed by Brexit hopes and UK data, and EUR/GBP tumbled from 0.9313 to 0.9130.

At the time of writing on Monday morning, EUR/GBP was trending close to the level of 1.9150, steadying as investors await more Brexit developments and Eurozone data.

Euro (EUR) Exchange Rates Steady Following Week of Losses as Recession Fears Ease

The Euro (EUR) has been unable to avoid losses against Sterling over the past week due to worsening German recession fears.

Last week’s Eurozone data only deepened concerns that Germany’s economy is showing no signs of recovery, and could fall into recession in the coming quarters. As Germany is the Eurozone’s biggest economy this has caused concern for the bloc’s outlook.

In particular, German economic sentiment and Eurozone industrial production stats disappointed investors.

However, on Sunday German finance minister Olaf Scholz indicated that the German government had the ability to mitigate potential economic crises with fiscal policy.

Hopes that Germany could introduce fresh fiscal stimulus, as well as expectations for global monetary policy easing, are lightening recession fears. This has bolstered Euro support today.

Pound (GBP) Exchange Rates Recoils Following Strong Rebound

In the second half of last week, the Pound strongly rebounded from its worst levels thanks to the latest UK data and Brexit speculation.

Inflation and retail sales results beat forecasts last week, slightly lightening Bank of England (BoE) interest rate cut and domestic recession fears.

Complementing the data was news that Britain’s opposition political parties were looking to find a way to cooperate in order to prevent a worst-case scenario no-deal Brexit.

The possibility of the new Boris Johnson government being ousted would lead to fresh uncertainty, but hopes that no-deal Brexit could be prevented helped the Pound to crawl away from its worst levels in years.

This morning, the Pound slipped slightly from its weekend highs, but hopes for a no-deal Brexit block kept the currency steady.

Euro to Pound (EUR/GBP) Exchange Rate Investors Await Eurozone Data and Brexit Developments

The Euro to Pound (EUR/GBP) exchange rate remains just over two pence below its best levels in a decade, and remains high overall. Despite this, the pair may not fall much lower without fresh impetus.

With hopes for German economic stimulus, German recession fears have lightened. If upcoming Eurozone data comes in stronger than expected too, the Euro’s appeal could strengthen.

Eurozone data to keep an eye out for includes Markit’s August PMI projections, due for publication on Thursday morning, as well as Eurozone consumer confidence on Thursday afternoon.

As for the Pound, investors are awaiting the potential for Britain’s opposition parties to discuss ways to prevent a no-deal Brexit. The main opposition party, Labour, has reportedly said that talks will be held next week.

If there are further signs that Britain’s opposition parties would be able to reach an agreement, Sterling may extend its recent gains.

On the other hand though, if relations break down and no progress is expected, no-deal Brexit fears would rise again and the Euro to Pound (EUR/GBP) exchange rate would be more likely to advance.