Pound Euro (GBP/EUR) Exchange Rate Edges Up as Parliament Suspension Ruled Unlawful
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate edged higher and the pairing is currently trading at around €1.1336.
On Tuesday morning the UK Supreme Court ruled that Boris Johnson’s decision to suspend parliament was unlawful.
Court president Lady Hale stated ‘the effect on the fundamentals of democracy was extreme’.
Added to this, she noted that it was now the Speaker’s decision what would happen next.
Following the ruling, Speaker John Bercow said that parliament must urgently return from prorogation ‘without delay’ which likely sparked a slight upswing in support for Sterling.
Pound Euro (GBP/EUR) Exchange Rate Muted as German Business Climate Edges Up
The Pound Sterling Euro (GBP/EUR) exchange rate remained muted and the pairing is currently trading at around €1.1302.
On Tuesday morning, data revealed that Germany’s Ifo Business Climate index edged up slightly from 94.3 to 94.6 in September.
Added to this, Ifo’s Current Conditions survey rose from 97.3 to a higher-than-expected 98.5.
However, firms in Germany became increasingly pessimistic about future expectations, leaving the single currency muted against Sterling.
Sterling (GBP) Flat Ahead of Supreme Court Ruling
The Pound was left near one-week lows as investors awaited the UK Supreme Court’s ruling on the legality of Boris Johnson’s suspension of parliament.
The court is set to rule on whether the Prime Minister acted unlawfully when he suspended parliament just weeks before the UK’s Brexit deadline.
While the government has argued prorogation is not a court matter, it will ‘abide by the ruling’ when announced on Tuesday.
However, the Prime Minister who is currently in New York for a UN climate conference has not ruled out the possibility of seeking to suspend parliament for a second time if the court rules against the government.
Euro (EUR) Muted as Eurozone Not Showing Signs of Rebound
The single currency was left under pressure as the flash German composite PMI sunk to its lowest level since October 2012.
Both the service sector and manufacturing sector activity slowed, with manufacturing declining at its fastest rate since July 2012.
Manufacturing orders also suffered, with September seeing the sharpest drop in more than a decade.
Added to this, private job sector growth slowed after six years of continuous employment growth which weighed on the Euro.
Commenting on Monday’s data, IHS Markit Principal Economist, Phil Smith said:
‘Another month, another set of gloomy PMI figures for Germany, this time showing the headline Composite Output Index at its lowest since October 2012 and firmly in contraction territory.
‘The economy is limping towards the final quarter of the year and, on its current trajectory, might not see any growth before the end of 2019.’
Meanwhile, in a speech on Monday afternoon, European Central Bank (ECB) President Mario Draghi confirmed worries for the single currency.
Speaking to the European Parliament’s committee on economic affairs he stated the bloc’s economy was not showing convincing signs of a rebound.
Pound Euro Outlook: Will a Dovish ECB Weigh on EUR?
Looking ahead to this afternoon, the Euro (EUR) could edge down against Sterling (GBP) following a speech from the ECB’s Luis de Guindos.
If Guindos’ tone is overly dovish and he reiterates Draghi’s message that the economy is not showing signs of a rebound, the Pound Euro (GBP/EUR) exchange rate is likely to rise.