Euro Pound (EUR/GBP) Exchange Rate Falls as Traders ‘Patient’ After Bercow’s Ruling
UPDATE: The Euro Pound Sterling (EUR/GBP) exchange rate slumped further on Monday afternoon, and the pairing is currently trading at around £0.8582.
House of Commons Speaker, John Bercow denied Boris Johnson the opportunity to put his Brexit deal to a ‘meaningful vote’ in parliament.
The Speaker said that as it is the ‘same matter’ it cannot be put to MPs for a second time as this would then be ‘repetitive and disorderly’.
He also noted that as the circumstances around the ruling had not changed, so his ruling was ‘necessary […] to ensure the sensible use of the House’s time and proper respect for the decisions that it takes’.
However, this did little to stop Sterling from rising against the Euro, and commenting on this, Naeem Aslam from Think Markets noted:
‘Sterling experienced a small movement towards the downside on the initial statement by the Speaker.
‘This confirmed that traders are patient and there is no panic in the market because the extension is widely expected.’
Euro Pound (EUR/GBP) Exchange Rate Falls as Risk of Chaotic Brexit Decreases
The Euro Pound Sterling (EUR/GBP) exchange rate edged lower on Monday morning, with the pairing currently trading at around £0.8598.
Sterling edged up at the start of the week after Downing Street said the government is going to push for another vote on Prime Minister Boris Johnson’s Brexit deal.
At the weekend, the Prime Minister was forced by law to send a letter to the European Union asking for an extension to Article 50, although Johnson did not sign the letter.
The government is now seeking a straight ‘yes’ or ‘no’ in a ‘meaningful vote’ on Johnson’s deal, although it is unclear whether the Speaker will allow the vote as it was already debated on Saturday.
Commenting on this, RBC Capital Markets’ chief currency strategist, Adam Cole said:
‘The weekend’s events, if anything, have further reduced the risk of disorderly exit.
‘If there is a knee-jerk negative reaction in the Pound as we emerge from the weekend with a greater overhang of uncertainty than hoped and some of the long positions are unwound, it should be faded soon.’
Sterling (GBP) Rises as Brexit Optimism Rises
Sterling was left muted as traders had not given up hope that the Prime Minister could get his Brexit deal approved by parliament.
The bout of fresh Brexit optimism has sent Sterling higher on Monday morning after the UK currency edged down from five month highs reached in the previous week’s session.
Commenting on this, Neil Wilson of Markets.com stated:
‘It looks like Boris Johnson will make another stab at winning parliamentary support for his Brexit deal. We need to see if Speaker John Bercow allows it – his record on frustrating Brexit is well known. Otherwise the government will bring forward implementation legislation quickly to drive through the bill in time so that a delay is not required. The government thinks it has the numbers for the deal in its raw form to pass.
‘Sterling remains vulnerable to significant price swings but has yet to make any real shift off the back of the weekend’s votes. Traders had anticipated a volatile open down under, but we’ve not really seen anything too drastic so far.’
Euro (EUR) Slides Ahead of Thursday’s ECB Meeting
Thursday will be Mario Draghi’s last monetary policy meeting as President of the European Central Bank (ECB).
This is likely putting pressure on the single currency thanks to the deep divisions that have emerged within the bank.
While economists have not predicted any major changes given the stimulus measures unleashed in September, some have suggested the meeting could be a largely ceremonial one to mark the end of Draghi’s term.
The divisions between policymakers have added to the perception that there is little room for the bank to maneuver, and senior officials have ruled out a U-turn.
Commenting on this, senior European economist at Societe Generale, Anatoli Annenkov noted:
‘From Draghi’s point of view, he will say the discussions are important and there are differences but as long as there is a majority in favour, those policies are carried out.
‘What is more important is the take of the next ECB president on the divisions but we’ll have to wait for her to take office to know that.’
Euro Pound Outlook: Will a Dovish ECB Weigh on EUR?
Looking ahead, Brexit is likely to remain the main catalyst for movement in Sterling (GBP). If the House of Commons Speaker, John Bercow allows a ‘meaningful vote’ to take place it could provide a slight upswing in support for the Pound.
Meanwhile, the Euro (EUR) could slip on Monday afternoon following a speech from the European Central Bank’s (ECB) Luis de Guindos.
If Guindos’ tone is overly dovish and he mentions monetary policy ahead of this week’s monetary policy meeting, it could cause the single currency to edge down against the Pound, and the Euro Pound (EUR/GBP) exchange rate could slide.