Pound to Euro Exchange Rate Slips ahead of Expected Week of Volatility
Last week’s week of UK political chaos actually ended up with the Pound Sterling to Euro (GBP/EUR) exchange rate advancing, slightly, but as new political uncertainties set in this morning the pair is under pressure again.
After opening last week at the level of 1.1068, GBP/EUR dipped to a low of 1.0939 before climbing in the second half of the week.
GBP/EUR ended the week on a mixed note following Friday’s monthly high of 1.1177, and trended near the level of 1.1095 at the time of writing this morning after markets opened.
The Pound (GBP) remained unappealing on lingering Brexit and political fears, but the Euro (EUR) struggled to capitalise ahead of this week’s anticipated European Central Bank (ECB) policy decision.
Pound (GBP) Exchange Rates Remain Under Pressure as No-Deal Brexit Fears Persist
Despite last week’s attempts from UK Parliament to prevent a no-deal Brexit, there are lingering fears that the government or even the EU could prevent the process from being extended again. This is keeping the Pound unappealing today.
Parliament is widely expected to pass a bill aiming to prevent a no-deal Brexit during today’s session.
Opposition MPs are also expected to reject a fresh attempt to trigger a snap general election, hoping to save it until after a worst-case scenario no-deal outcome has been successfully averted.
However, speculation is rising that Prime Minister Boris Johnson will attempt to find a way to aim for a no-deal Brexit even if the bill to prevent one passes.
There is also speculation that the EU itself will not allow another extension to Brexit, amid reports that France is considering a veto to a possible request to extend Brexit. This has left the fear of a no-deal Brexit on the table and the Pound weak.
Euro (EUR) Exchange Rates Steady with European Central Bank (ECB) Anticipated
The European Central Bank (ECB) is finally set to hold its anticipated September policy decision on Thursday this week, and anticipation for the decision is keeping the Euro from major movements today.
Investors widely expect the ECB will introduce monetary policy easing and may cut rates as well.
Bets for ECB monetary policy easing have only risen recently, as the latest Eurozone data has continued to indicate that the bloc’s economy is struggling to recover from a long slowdown.
The US-China trade war is also expected to keep hindering Eurozone economic activity. It has hit Germany particularly hard, and economists are now increasingly expecting Germany to fall into recession in the coming quarters.
Still, with the ECB expected to be this week’s biggest news, investors are hesitant to sell the Euro much lower.
Pound to Euro (GBP/EUR) Exchange Rate Focused on UK Politics for Now
While the September European Central Bank (ECB) policy decision is set to be this week’s biggest economic event, UK politics still dominate Pound to Euro (GBP/EUR) exchange rate movement for the time being.
Today’s big focus will be the upcoming events of UK Parliament. The bill to prevent a no-deal Brexit is expected to be passed successfully, and parliament is expected to block an attempt at an early election in October.
Normally, this would leave the Pound stronger. However, speculation that Prime Minister Boris Johnson could continue to aim for a no-deal Brexit through some kind of loophole will keep markets on edge.
With parliament expected to be prorogued sometime this week, the Pound’s movement may cool later in the week, when market focus will turn to the European Central Bank (ECB).
Until then, the Euro will be influenced by French data tomorrow, and German inflation stats on Wednesday. Tomorrow’s UK job data could also cause some Pound to Euro (GBP/EUR) exchange rate movement.