GBP/EUR Suffers Sharp Losses after EU Leaders Reject Brexit Plans at Salzburg Summit
Despite trending higher for almost the whole week, last Friday saw Pound Sterling suffer some sharp losses across the board, including a 1.3% loss against the Euro.
The selloff was in reaction to EU leaders’ comprehensive rejection of UK Prime Minster Theresa May’s Brexit plans at a summit in Salzburg.
Theresa May had been hoping to get an agreement with the EU, but her plans were rebuffed, causing her to hold a televised live address from Downing Street to reiterate her commitment to securing an exit deal with the bloc.
In a defiant speech May urged the EU to ‘respect’ Britain, but also said ‘no deal is better than a bad deal’.
This had the effect of spooking Sterling investors, who sold off their Pound holdings on renewed fears of a ‘no-deal’ Brexit being the most likely outcome.
GBP/EUR Regains 0.3% as Buyers Re-estimate Risks of ‘No-Deal’ Brexit
Today, however, shows a very different picture with Sterling regaining some of its losses on the back of reassurances from Brexit Secretary Dominic Raab.
Speaking to Talk Radio, Raab was upbeat about the possibility of the UK and EU still being able to reach an agreement and that a no-deal Brexit would be avoided:
‘We keep on negotiating in good faith, we try and get the best deal we can, but we are ready for all eventualities. We’ll keep negotiating in good faith. I’m confident we’ll get there.
‘These blips in the road, they’re blown a little bit out of proportion, but we double down, we don’t throw our toys out of the pram, hold our nerve, keep our cool.’
His comments caused an immediate rise in Sterling sentiment, although it remains to be seen how long it lasts in the face of the ongoing market jitters surrounding Brexit.
GBP/EUR Exchange Rate Week Ahead: Could there be More Brexit Related Volatility in Store?
For the remainder of this week’s session it looks likely that in the absence of any major data releases the Pound Euro (GBP/EUR) exchange rate will continue to be dominated by Brexit soundbites.
Although Raab’s reassurances have placated markets for now, Sterling remains very sensitive to even the slightest development on the Brexit front and traders will be listening out for anything that could indicate that a no-deal scenario remains likely.
Meanwhile the Euro could find itself under pressure in the latter half of this week as economists forecast that ongoing global trade uncertainties will have dampened Eurozone business confidence this month.
On Friday we will see the release of a raft of inflation figures for Germany, France and Spain, with the consensus being that these will show a further slowdown.
Also on Friday are the UK’s latest Q2 gross domestic product figures, which are predicted to show steady growth at 0.4% QoQ and 1.3% YoY.