Pound to Euro Exchange Rate Investors Await Brexit, PMI and European Central Bank News
Due to a lack of support for the Euro (EUR) in recent sessions, the Pound Sterling to Euro (GBP/EUR) exchange rate has avoided significant losses on the latest UK political and Brexit developments. The pair remains weak amid concerns that a election is imminent.
Following last week’s impressive GBP/EUR surge from 1.1463 to 1.1618, this week’s movement has been a little narrower overall.
Near the beginning of the week, GBP/EUR touched on a five-month-best of 1.1655. However, yesterday’s Brexit developments knocked Sterling lower and the pair has been trending closer to the level of 1.1590 today.
With key Eurozone data due for publication towards the end of the week, as well as the final policy decision of European Central Bank (ECB) President Mario Draghi’s term, the Pound to Euro exchange rate might be influenced by more than just Brexit in the coming sessions.
Pound (GBP) Exchange Rates Jittery as UK Election Looks Increasingly Likely
The Pound’s (GBP) bullish performance of recent weeks has come to an end for now, as UK Parliament yesterday voted not to fast-track Prime Minister Boris Johnson’s new Brexit plan.
The Brexit plan, which was reached by UK and EU negotiators last week, has not yet faced proper scrutiny from MPs. This made many MPs hesitant to support a fast-track.
As a result of the fast-track being blocked, Johnson opted to put his Brexit plan on pause for the time being.
It is seen as likely that the next step will be for the EU to accept Britain’s request for another Brexit extension. A delay until the 31st of January is expected, and it is seen as highly likely that a UK snap general election will take place in that time.
Amid fears that a general election could lead to even deeper uncertainty on how Brexit should be handled, the Pound has tumbled. However, the Pound’s losses have been limited slightly too, as fears of a no-deal Brexit are lightening.
Euro (EUR) Exchange Rates Struggles to Capitalise amid Brexit Jitters
Much of the Euro’s recent strength has also been due to Brexit optimism.
As the Eurozone would benefit from close UK-EU relations post-Brexit, the Euro has been influenced by Brexit developments lately – albeit less than the Pound.
This also means that the Euro has been weakened by expectations for a Brexit delay, and a UK election that could potentially lead to deeper Brexit uncertainty.
This, combined with fears of continued slowdown in the Eurozone economic outlook, has limited the Euro’s gains against a weak Pound today.
Investors are also hesitant to move too much on the Euro ahead of tomorrow’s session, when European Central Bank (ECB) President Mario Draghi sees his final ECB policy decision before his term comes to an end.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Brexit Developments and Key Eurozone News
The Pound to Euro (GBP/EUR) exchange rate has been dominated by Brexit movement over the past week, and unless tomorrow’s key Eurozone data or news is highly surprising that is likely to continue.
Markets are eagerly awaiting news on the next steps for the Brexit process. The EU is widely expected to accept Britain’s request for extension, but a long extension might make a general election more likely.
If a general election is expected, the Pound may be in for a longer period of volatile, mixed movement amid fears that the results of the election could further complicate the Brexit process.
On the other hand, a shorter Brexit delay and signs that Boris Johnson’s Brexit deal could still succeed might lead to fresh Pound gains.
Brexit news aside, the Euro is likely to be driven by Eurozone PMI data tomorrow. Markit’s German manufacturing PMI projection could soften German growth fears if they beat expectations.
The European Central Bank (ECB) is not expected to make any shifts in tone during Mario Draghi’s final policy decision as President tomorrow, but the decision will be closely watched by Pound to Euro (GBP/EUR) exchange rate investors as well.