Pound to Euro Exchange Rate Flounders Near Lows as Brexit Uncertainties Return
Concerns that the UK government’s new Brexit plan would not be enough to lead to a fresh UK-EU deal or successfully pass through UK Parliament left the Pound Sterling to Euro (GBP/EUR) exchange rate unappealing this morning.
Since opening this week at the level of 1.1235, GBP/EUR has seen mixed movement due to weak performance in both the Pound (GBP) and the Euro (EUR).
After touching on a high of 1.1305 on Monday though, GBP/EUR has trended weaker as hopes for a softer Brexit deal to succeed fail.
While GBP/EUR has recovered from Tuesday’s half-month low of 1.1196, the pair has only recovered slightly and at the time of writing still trends below the week’s opening levels near the level of 1.1224.
Pound (GBP) Exchange Rates Fall Limp on Doubts towards Boris Johnson’s Brexit Plan
UK Prime Minister Boris Johnson offered vague details on his government’s new Brexit plan towards the end of the Conservative Party annual conference.
Johnson has proposed that rather than the EU’s controversial backstop in Ireland, there should instead be a regulatory border in the Irish Sea. After making the proposals, he said the ball was now in the EU’s court in terms of progressing negotiations.
While Johnson has indicated his stance has wiggle-room, and EU officials have given a cautious welcome to the news, EU negotiators are reportedly not optimistic overall.
Political analysts also said that the details did not contain much that wasn’t already known, and there was doubt that they would be well-received in Brussels.
Johnson has said that if his proposals completely fail, he will aim for a no-deal Brexit at the end of this month.
Euro (EUR) Exchange Rates Struggle to Benefit from Rival Weakness amid Poor Eurozone Data
Investors have been buying the Euro over its rivals like the Pound and US Dollar (USD), largely due to weakness in those currencies in recent sessions.
While Brexit uncertainty weighs heavily on the Pound, the US Dollar (USD) has been weaker due to news that US manufacturing saw its worst print in a decade according to Tuesday’s PMI.
Still, the Euro has been unable to properly benefit from the Pound’s weakness today, as the latest Eurozone data continues to indicate that all is not well with the Eurozone economy.
Markit’s final September services and composite PMIs were published and many key prints fell short of forecasts. This included Germany’s services PMI.
Germany’s composite PMI fell into contraction, and the overall Eurozone composite PMI revealed a practically stagnant 50.1 in the worst reading for the bloc since June 2013. In PMIs, 50 is the point separating contraction from growth.
Pound to Euro (GBP/EUR) Exchange Rate Investors Await Brexit Developments
With Eurozone data putting further pressure on the Euro all the time lately, the shared currency is unlikely to see a strong rise in demand any time soon. Following its recent weakness though, further downside is also limited.
As a result, tomorrow’s German construction PMI from September is unlikely to have a big impact on Euro movement unless it is highly surprising.
Late-week Pound to Euro (GBP/EUR) exchange rate movement will be influenced more by UK politics and Brexit.
With the EU expected to offer a detailed response on the UK government’s Brexit plan, and the government expected to test the popularity of its plan in parliament, there may be developments on the fate of the plan in the coming days.
If the government’s Brexit plans are roundly rejected, the Pound to Euro (GBP/EUR) exchange rate could be in for further losses as fears of a no-deal Brexit becoming reality would return.