EUR/GBP Exchange Rate Buoyed by Brexit Jitters
The Euro Pound (EUR/GBP) exchange rate is racing higher this morning in response to reports suggesting the UK government is preparing for a breakdown in Brexit negotiations.
At the time of writing, the EUR/GBP exchange rate is currently trading at around £0.8982, having surged roughly 0.6% from this morning’s opening levels.
Pound Sterling (GBP) in Retreat as Boris Johnson Ready to Give up on Brexit Deal?
Reports that Brexit talks between the UK and EU on the verge of collapse have sent the Pound (GBP) sharply lower this morning.
Downing Street is preparing for a breakdown in talks this week, according to a government official who spoke to the BBC.
Boris Johnson made a ‘final’ offer to the EU last week, but this was roundly rejected by EU leaders for not addressing a number of key sticking points.
Another government source suggested a Brexit deal is ‘essentially impossible’ after a phone call between the PM and German Chancellor Angela Merkel, after Merkel told Johnson any deal must involve Northern Ireland remaining in a customs union.
3. No 10 source says 'talks in Brussels are close to breaking down, despite the fact the UK has moved a long way' – today's 8am call described as a 'clarifying moment'
— Laura Kuenssberg (@bbclaurak) October 8, 2019
Perhaps even more worrying for GBP investors however is a report in the Spectator detailing the government’s plans to try an circumvent the Benn act, which compels Johnson to request another Brexit extension if a deal cannot be found.
A leaked message published by the Spectator read:
‘Our legal advice is clear that we can do all sorts of things to scupper delay which for obvious reasons we aren’t going into details about.
‘We will make clear privately and publicly that countries which oppose delay will go the front of the queue for future cooperation — cooperation on things both within and outside EU competences.’
Surprisingly Upbeat German Industrial Data Buoys the Euro (EUR)
The Euro (EUR) meanwhile, has found some modest support from the release of Germany’s latest industrial production figures.
According to data published by the federal statistics agency, Destatis, factory output rose by 0.3% in August, rebounding from an upwardly revised -0.4% and defying expectations of another contraction.
This was welcome news to EUR investors, providing them with a sliver of hope that the Eurozone’s largest economy isn’t contracting as severely as previously feared.
However analysts warn the risks of Germany slipping into a recession remain significant as the economy continues to face headwinds from Brexit and the US-China trade dispute.
EUR/GBP Exchange Rate Forecast: Stagnating UK Growth to Keep Pressure on Sterling
Outside of Brexit, the publication of the UK’s monthly GDP release could help the Euro to Pound (EUR/GBP) exchange rate maintain its upward trajectory this week.
Economists forecast Thursday’s figures will show the UK’s economy stagnated in August, potentially reviving fears the UK economy could fall into a recession.
Also possibly influencing Sterling sentiment could be a speech by Bank of England (BoE) Governor Mark Carney, who will be watch closely for any hints that the BoE could be preparing to lower interest rates.
Meanwhile, could we see the publication of Germany’s trade figures drag on the Euro in the latter half of the week if the country’s trade surplus narrowed as expected in August?