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Pound Sterling to Euro Exchange Rate Firms as Hopeful Brexit Speculation Rises

Pound to Euro Exchange Rate Sustains Gains Ahead of European Central Bank (ECB) Decision

The Pound Sterling to Euro (GBP/EUR) exchange rate has been able to sustain most of this week’s gains, as speculation ramps up that the Brexit process could still go smoothly and a no-deal Brexit could be successfully avoided.

Since opening this week on mixed levels, GBP/EUR has seen a solid advance. While GBP/EUR has not been able to sustain the two-month-high of 1.1221 seen on Monday, the pair hasn’t been trending much lower.

At the time of writing on Wednesday, GBP/EUR trended near the level of 1.1188. The pair trended with support, as Brexit speculation became more cautiously optimistic and bolstered Sterling (GBP).

Still, the Euro (EUR) could be more likely to drive the Pound to Euro exchange rate towards the end of the week, as market attention turns to the European Central Bank (ECB).

Pound (GBP) Exchange Rates Supported on Brexit Deal Speculation

The Pound has had a fairly bullish week so far. The British currency surged on UK growth data on Monday, which suggested Britain was likely to avoid a recession, and held those gains yesterday thanks to decent job market stats and Brexit speculation.

While UK Parliament has now been prorogued until October, the Pound is still benefitting from news that MPs successfully passed a bill to prevent a no-deal Brexit.

Concerns persist that Prime Minister Boris Johnson could find a way to force a no-deal Brexit, but speculation is also rising that opposition MPs are exploring options to secure a softer Brexit deal.

Reports emerged yesterday saying that a cross-party group of MPs will attempt to pass a version of ex-Prime Minister Theresa May’s deal as well as hold a vote on a potential second referendum when parliament reconvenes in October.

Euro (EUR) Exchange Rates Unappealing amid European Central Bank (ECB) Uncertainty

The European Central Bank (ECB) will hold its September policy decision during tomorrow’s European session, and the decision is the most hotly anticipated economic event of the week for currency markets.

Investors have been hesitant to make big moves on the Euro this week so far amid anticipation for the bank’s decision, and uncertainty over how dovish the bank will become.

Markets expect the ECB will cut Eurozone rates, but there is uncertainty over how much, if any, quantitative easing (QE) the bank could introduce.

The Eurozone outlook is fairly murky, with German ecostats still indicating that Germany’s economy is headed for recession. Overall investors have had little reason to buy the Euro but it has avoided losses due to ECB anticipation.

Pound to Euro (GBP/EUR) Exchange Rate Awaits European Central Bank (ECB) Decision

Unless there are notable developments in UK politics or Brexit over the coming days, the Pound to Euro (GBP/EUR) exchange rate is more likely to be driven by Euro movement instead amid a slew of influential Eurozone data and news on the way.

Thursday will be the biggest day of the week for Euro investors, as key German and French inflation data will be published, and the European Central Bank (ECB) will hold its highly anticipated September policy decision.

The ECB is expected to ease monetary policy through a rate cut, but markets remain uncertain over how much quantitative easing (QE) the bank will introduce.

If the bank is more dovish than expected over Germany’s economic outlook or the trade war, the Euro could weaken and GBP/EUR would see some late-week gains.

Other Eurozone data including industrial production tomorrow and German wholesale prices on Friday could also influence the Pound to Euro (GBP/EUR) exchange rate.