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3-Month Brexit Extension Pressures Euro to Pound Sterling Exchange Rate

Euro to Pound Exchange Rate Lower but Brexit Uncertainties Persist

Despite the latest Brexit uncertainties, the Euro to Pound Sterling (EUR/GBP) exchange rate has slipped so far this week. Yesterday’s Brexit developments mean fresh uncertainties, but Pound (GBP) investors were relieved by news that a Brexit extension was confirmed.

Following last week’s modest advance from the level of 0.8607 to 0.8638, EUR/GBP has seen even narrower movement since markets opened yesterday.

EUR/GBP has been largely trending lower since yesterday afternoon, and trended near the level of 0.8627 at the time of writing today.

The Euro (EUR) has been unable to capitalise on mixed Pound movement, amid lasting concern about the Eurozone’s weak outlook.

Euro (EUR) Exchange Rates Steady Following Draghi’s Farewell Speech

The European Central Bank (ECB) held its October policy decision last week, which was the final policy decision of outgoing President Mario Draghi. The Euro has been fairly steady since the generally unsurprising decision.

Draghi, often called the man who saved the Euro, held a farewell speech yesterday. In his speech, he urged the divisions among ECB officials to unite, as he defended his own policy decisions.

ECB interest rate cut bets have lightened amid signs that other ECB officials have not been as dovish as Draghi lately.

Draghi is set to step down and be succeeded by Christine Lagarde at the end of the month, and he departs amid a poor economic outlook for the Eurozone.

Investors have had little reason to buy the Euro as a result, and for now are awaiting upcoming German and Eurozone data.

Pound (GBP) Exchange Rates Supported by Brexit Delay despite Fresh Uncertainties

After the EU delayed its decision on how long to extend the Brexit process for, it finally confirmed a flexible extension until the 31st of January yesterday.

The news doused fears that a worst-case no-deal Brexit was possible for at least another three months, which was certainly a relief to investors and gave the Pound more solid support.

However, investors are hesitant to buy the Pound too much either, as the path forwards for the Brexit process is unclear.

The UK government’s attempt to force a general election failed yesterday, and the government is expected to try to secure an election again in the coming days.

If an election cannot be confirmed, the government may continue with attempts to push its Brexit plan through parliament, which still does not have the support it needs to pass. The uncertainty of how Brexit will proceed is limiting the Pound’s appeal.

Euro to Pound (EUR/GBP) Exchange Rates Awaits Eurozone Data and UK Election Developments

While the Euro has lacked drive so far this week, investors are eagerly awaiting key Eurozone ecostats due for publication in the coming sessions.

Tomorrow will see the publication of France’s Q3 growth rate projections, German unemployment and inflation, and Eurozone confidence results from October.

These will be followed on Thursday by German retail stats, French inflation stats, and Eurozone growth, inflation, and unemployment stats.

Euro investors will also be closely watching the Federal Reserve tomorrow. If the Fed takes any surprising stances on the US economy, the Euro could be driven as the shared currency has a negative correlation with the US Dollar (USD).

As for the Pound, investors are eagerly waiting to see if the UK government is able to secure a December election.

If an election is confirmed, the Euro to Pound (EUR/GBP) exchange rate could recover from this week’s dips as UK political uncertainty rises.