Euro Pound (EUR/GBP) Exchange Rate Rises as Brexit Deal Based on PM’s Proposals ‘Overwhelmingly Unlikely’
The Euro Pound Sterling (EUR/GBP) exchange rate rose and the pairing is currently trading at around £0.8981.
Tuesday saw the Euro reach a one-month high against the Pound as Brexit pessimism strangled GBP.
Reports showed that Brexit talks between the UK and EU were close to collapse.
Meanwhile, reports revealed that a Number 10 source said that in a phone call between the Prime Minister and Germany’s Angela Merkel, the German chancellor made it clear a deal based on Johnson’s proposals was ‘overwhelmingly unlikely’.
It was also noted that a Brexit deal is ‘essentially impossible’, and said that if the call represented a new position it means securing a deal is impossible ‘not just now but ever’.
Sterling sentiment was further dampened as European Council President Donald Tusk accused the Prime Minister of playing a blame game.
In a tweet, Tusk addressed Johnson and stated:
‘What’s at stake is not winning some stupid blame game. At stake is the future of Europe and the UK as well as the security and interests of our people. You don’t want a deal, you don’t want an extension, you don’t want to revoke, quo vadis?’
Euro (EUR) Rises as German Industrial Output Increases Unexpectedly
The single currency received a slight upswing of support as Germany’s industrial output rose unexpectedly in August.
Output rose by 0.3% despite expectations the figure would slump by around -0.1%.
Added to this, July’s reading was upwardly revised from -0.6% to -0.4%.
However, while this morning’s data provided a sense of relief after the bloc’s largest economy saw factory orders slide on Monday, it is unlikely this is a turning point.
Analysts have said Germany remains at risk of falling into a recession after months of disappointing manufacturing data.
In a note, Thomas Gizel of VP Bank wrote:
‘Given that industrial output provides us with a deep look into the economic development in the third quarter, one could entertain the idea that the German economy will just about avoid a recession.
‘But unfortunately one must consider the industrial production data for August as a flash in the pan. We expect production in September to be negative. This means that GDP will contract at least slightly in the third quarter.’
Euro Pound Outlook: Will GBP Extend its Losses?
Looking ahead, it is likely the Pound (GBP) will continue to slide against the Euro (EUR) as Brexit pessimism grips the currency.
If reports reveal that Brexit discussions between the UK and EU collapse, it is likely Sterling will extend its losses, causing the Euro Pound (EUR/GBP) exchange rate to rally.