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Euro to Pound Sterling Exchange Rate Volatility Worsens as Markets Anticipate Brexit Chaos

Euro to Pound Exchange Rate Weakened on Eurozone Economic Concerns

Despite a fresh rise in no-deal Brexit fears last week, the Euro to Pound Sterling (EUR/GBP) exchange rate ended up sliding slightly amid rising concerns about the Eurozone’s economic outlook and possibility of a German recession.

Last week saw EUR/GBP continue its drop, slipping half a pence from 0.9100 to 0.9034. At the time of writing, EUR/GBP was trending higher near the level of 0.9060 again as no-deal Brexit fears spooked Pound (GBP) investors.

When markets opened this morning, EUR/GBP saw a short dip to a low of 0.9006, its lowest level since the end of July.

Unless there is some optimistic Brexit news this week though, EUR/GBP’s downtrend may already have come to an end.

Euro (EUR) Exchange Rates Pressured as Eurozone Economic Outlook Worsens

Due to modest recovery in rivals like the Pound and US Dollar (USD) in recent weeks, investors have had little reason to buy the Euro as the Eurozone’s economic outlook continues to worsen.

Key German data has continued to fall short of expectations and the US-China trade war persists, worsening fears that Germany’s economy could fall into recession in the coming quarters.

On top of that, the Eurozone’s latest Consumer Price Index (CPI) inflation rate report fell slightly short of expectations on Friday.

While the data had no major impact on European Central Bank (ECB) monetary policy bets, it left economists confident that the bank now had plenty of reason to ease monetary policy.

This morning’s Eurozone manufacturing PMIs did little to improve the Euro outlook. German manufacturing came in at 43.5 in its final August PMI, rather than the projected 43.6. Overall, Eurozone manufacturing contracted a 47 as expected.

Pound (GBP) Exchange Rates Hit by Fresh UK General Election Speculation

Ahead of a week of potential Brexit chaos, the Pound showed its volatility this morning as Brexit and UK political uncertainty once again took focus.

Parliament will reconvene from its summer recess tomorrow, but will be prorogued again from next week until October. This leaves MPs with mere days to take potential action against the possibility of a no-deal Brexit.

Prime Minister Boris Johnson has maintained his stance that Britain will leave the EU on October 31st, with or without a deal. As no-deal Brexit fears deepen, the Pound’s volatility worsens and the currency struggles to hold gains.

Johnson has cancelled a planned meeting with Conservative Party rebels, and has threatened to essentially kick MPs out of the party if they vote against the government with Parliamentary attempts to block a no-deal Brexit.

This would leave the government without a Parliamentary majority, and would make a Pound-negative general election even more likely.

Euro to Pound (EUR/GBP) Exchange Rate to be Volatile amid Recession and Brexit Fears

The Euro lacks the drive to sustain a strong recovery itself, but if Brexit jitters continue to hit the Pound then the Euro to Pound (EUR/GBP) exchange rate could regain more of its recent losses.

UK Parliament will reconvene tomorrow, and it is widely expected that opposition and rebel MPs will make efforts to prevent a no-deal Brexit as soon as possible – before parliament closes again next week.

If a no-deal Brexit is blocked the Pound could surge, but if the plans fail, or if a general election becomes inevitable, the Pound will remain considerably weak.

Market movement will be dominated by Brexit concerns, so the Pound may not be heavily affected by upcoming UK data such as services PMI stats on Wednesday.

Sterling’s movement on Brexit is also likely to overshadow the impact of Eurozone data. Still, the Euro to Pound (EUR’/GBP) exchange rate could weaken if upcoming Eurozone PMI and retail sales data falls short, or strengthen if the data impresses.