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Pound Sterling to Euro Exchange Rate Forecast: GBP/EUR Declines after ‘Brexit’ Support Swells

Pound Sterling to Euro (GBP/EUR) Conversion Rate Predicted to Hold Losses after Boris Johnson Voices Support for ‘Brexit’ Campaign

The Pound Sterling to Euro (GBP/EUR) exchange rate declined by around -0.8% on Monday afternoon.

Initially, following the announcement from Prime Minister David Cameron that he has secured a deal to reform the relationship between the UK and the EU, the Pound advanced versus its major peers. The appreciation was short-lived, however, after London Mayor Boris Johnson stated that he would be supporting the campaign for the UK to leave the European Union.

PM Cameron has set the date of the referendum for June 23rd which gives a solid time frame in which traders will be expecting significant GBP volatility amid political uncertainty.

‘Brexit will be one of the biggest events in 2016,’ stated Evan Lucas, a markets strategist in Melbourne at IG Ltd. ‘Boris Johnson’s decision over the weekend to support the Brexit campaign has caused the Pound to move wildly. He is widely believed to be the next leader of the Conservative Party and is highly popular — his position has a lot of influence.’

Perhaps one of the most significant concerns for many is that the city of London will suffer a huge withdrawal in foreign investment should the UK leave the EU. However, given that Johnson is the Mayor of London, his support to leave the EU would suggest that those concerns are unfounded.

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.2836.

EUR/GBP Conversion Rate Predicted to Hold Gains despite Weak Eurozone Sectoral Data

Although the shared currency is holding gains versus the British Pound it has dived versus most of its other major peers today. The depreciation can be linked to a combination of disappointing domestic data results and speculation that the European Central Bank (ECB) will ease policy in March.

European economic data was disappointing today. With the exception of the German Services PMI and the French Manufacturing PMI, all French, German and Eurozone Composite, Manufacturing and Services PMIs failed to meet with the respective market consensuses.  

At 50.2, the result from Germany’s Manufacturing PMI is dangerously close to the 50 mark which separates growth from contraction. Meanwhile, France’s services and composite output unexpectedly fell into contraction territory.

‘The German economy appears to be in the midst of a slowdown,’ said Oliver Kolodseike, an economist at Markit. Manufacturing is ‘near stagnation,’ he said.

The Pound Sterling to Euro (GBP/EUR) exchange rate dropped to a low of 1.2740 during Monday’s European session.

Pound Sterling to Euro Forecast: UK Political Uncertainty to Continue to Weigh on GBP/EUR Exchange Rate

Although traders will be satisfied that there is finally a definitive time for the EU referendum, there is a high likelihood that the Pound will continue to weaken as traders attempt to gauge the outcome. If it is anything like the Scottish referendum, the Pound is likely to endure significant price swings as traders react to opinion polls.

Given the increased likelihood of ECB intervention in the March policy meeting, there is a high chance that the Euro will struggle versus its major peers. Such is the extent of Sterling losses since the turn of the year however, that the Euro is likely to continue holding a position of strength versus its UK counterpart.

The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.2871 during Monday’s European session.