Euro to Pound Exchange Rates Avoid Further Losses with Brexit Uncertainties in Focus
While the EU indicated that it was prepared to allow the formal Brexit date to be delayed, the Euro to Pound Sterling (EUR/GBP) exchange rate quickly recovered from a Monday morning dip. Uncertainties about Tuesday’s Brexit vote left the Pound (GBP) unappealing.
EUR/GBP spent most of last week climbing, opening the week at the level of 0.8957 and briefly touching a high of 0.9058 on Friday before plunging and actually ending the week lower – at the level of 0.8928.
The Pound’s sudden late-week recovery was caused by speculation that the formal Brexit date could be delayed. As these hopes left Sterling much stronger on Friday, fresh hopes only gave the Pound a limited boost on Monday morning.
When markets opened this morning, investors reacted to news that EU officials were preparing to allow the Brexit date to be delayed until at least July.
However, as weakness in rivals has left the Euro (EUR) fairly appealing over the past week and Brexit uncertainty persisted, the Euro to Pound (EUR/GBP) exchange rate avoided further losses and trended near the week’s opening levels.
Euro (EUR) Exchange Rates Struggle to Recover as Eurozone Industrial Production Slumps
The Euro was able to hold its ground this morning and avoid further losses versus a volatile Pound, but the Euro to Pound (EUR/GBP) exchange rate also failed to recover from Friday’s sharp losses due to a lack of fresh support for the Euro.
Much of the Euro’s appeal last week was due to weakness in rivals like the Pound and US Dollar (USD). The US Dollar is the Euro’s biggest rival and the two currencies have a negative correlation.
As Sterling was supported by Brexit speculation and the US Dollar’s selloff slowed, the Euro’s strength faded too.
Concerns about the Eurozone’s weakening growth outlook emerged again following the publication of the Eurozone’s November industrial production report on Monday morning.
Both monthly and yearly prints came in with surprisingly deep contractions well below analyst expectations, with the yearly figure slumping to a particularly disappointing -3.3%. This news limited market demand for the Euro.
Pound (GBP) Exchange Rates Fail to Hold Best Levels amid Brexit Uncertainty
Monday morning’s EUR/GBP low of 0.8898 was the worst level for the pair in over a month, but the Pound was unable to hold its morning gains as market uncertainties regarding Tuesday’s anticipated UK Parliament vote set in.
Despite comments from EU officials indicating that the EU was prepared to delay the formal Brexit date by extending Article 50 if the UK government asks, the Pound already climbed on Brexit delay hopes on Friday.
As a result, Monday’s strength was limited and investors instead remained concerned by the possibility that the Brexit outlook could change completely within the coming days.
UK Prime Minister Theresa May’s negotiated UK-EU Brexit withdrawal deal is not seen as popular enough to pass Tuesday’s UK Parliament vote.
This will leave the UK government under pressure to come up with an alternative proposal for the outcome, and MPs may also attempt to drive the direction the Brexit process takes next. This imminent uncertainty is leaving Sterling unappealing.
Euro to Pound (EUR/GBP) Exchange Rate Investors Hotly Anticipate UK Parliament Vote
Tuesday’s UK Parliament vote on Brexit could be hugely influential to the Euro to Pound (EUR/GBP) exchange rate outlook in both the short term and the long-term.
The path the Brexit process takes next may change the face of the outcome, as well as having the potential to change Britain economically and politically.
The opposition Labour Party has indicated it will aim for a general election if the UK government’s Brexit deal fails, and the possibility of a general election would worsen uncertainty and leave the Pound weaker.
If a No-deal Brexit becomes more likely, this would lead to a Pound plummet, while the chance of a second EU referendum would make the Pound more appealing.
Essentially, with such a major vote taking place on Tuesday Brexit developments are likely to drive EUR/GBP movement for much of this week.
Still, some key Eurozone data due in the coming days, including Germany’s latest growth results on Tuesday and German inflation on Wednesday, may also influence the Euro to Pound (EUR/GBP) exchange rate this week.