Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Remain Under Pressure From Brexit Uncertainty

Brexit Jitters ‘Driving Away’ Business from UK Hampering GBP/EUR Exchange Rate

UPDATE: Confidence in Pound Sterling (GBP) deteriorated further throughout trade on Thursday, with Brexit-based jitters dominating the minds of investors.

With signs suggesting that Brexit uncertainty is driving away business investment in the UK economy investors were quick to pile out of GBP exchange rates.

Pound Sterling Euro (GBP/EUR) Exchange Rate Under Pressure From Robust German Retail PMI

UPDATE: June’s raft of Eurozone retail PMIs proved a little mixed in nature, although this was not enough to shore up the Pound Sterling to Euro (GBP/EUR) exchange rate.

Continued retail sector contraction in France and Italy was offset by an unexpectedly strong surge in Germany, suggesting that the Eurozone’s powerhouse economy remains in a robust state of health.

This offered investors fresh incentive to favour the Euro (EUR) on Thursday morning, in spite of lingering worries over the global trade outlook. As a result, GBP/EUR is currently down around 0.15%.

Pound Sterling Euro (GBP/EUR) Exchange Rate Softens as German Factories Accelerate Production

A sharp rebound in German factory orders has left the Pound Sterling to Euro (GBP/EUR) exchange rate on a weaker footing, as confidence in the health of the Eurozone’s powerhouse economy returns.

Investors were encouraged to find that new orders had jumped 4.4% on the year in May, indicating a recovery in demand for German products.

This offered the Euro (EUR) a rallying point on Thursday morning, easing some market concerns over the outlook of the Eurozone economy.

As global trade tensions continue to mount, however, EUR exchange rates could struggle to hold onto any gains for long.

Brexit Uncertainty Encourages GBP/EUR Exchange Rate Weakness

Uncertainty surrounding Brexit continued to weigh on the Pound Sterling to Euro (GBP/EUR) exchange rate, meanwhile.

As Theresa May’s cabinet remains clearly divided over her preferred shape of the UK’s future relationship with the EU there are concerns that any meaningful progress towards a final deal is unlikely to materialise any time soon.

A warning from Jaguar Land Rover put further pressure on Pound Sterling (GBP) exchange rates, with the company saying that a ‘hard Brexit’ deal could force it to downsize its UK operations.

With the labour market already under pressure thanks to a string of high street closures, the threat of tens of thousands of additional job losses gave investors little cause for confidence.

Pound Sterling Euro (GBP/EUR) Exchange Rate Volatility Possible on BoE’s Carney Speech

A speech this afternoon by Bank of England (BoE) Governor Mark Carney could offer support to the Pound Sterling to Euro (GBP/EUR) exchange rate today.

After the stronger-than-expected raft of UK PMIs markets are hopeful that the BoE will opt to raise interest rates at its August policy meeting.

Any signs of hawkishness from Mr Carney would boost the odds of an August move, limiting the downside potential of Pound Sterling.

On the other hand, if he fails to mention monetary policy at all this may encourage GBP traders to sell GBP.

Unease over Brexit is likely to dominate the outlook of the Pound for the time being, unless UK and EU negotiators show signs of moving closer to an agreement on key issues.

Lingering Trade Tensions Forecast to Support GBP/EUR Exchange Rate

Another strong showing from Friday’s German industrial production data may weigh on the Pound Sterling to Euro (GBP/EUR) exchange rate.

Any more signs of strength from the Eurozone’s powerhouse economy would ease concerns over the prospect of growth slowing further in the months ahead.

On the other hand, an escalation in trade tensions could leave EUR exchange rates on a fresh downtrend as the threat of a US-EU trade war continues to hang over policymakers.

A stronger US Dollar (USD) could keep the Euro under pressure, especially if the latest US labour market data proves encouraging.

An underwhelming industrial production figure could also help to push the Pound Sterling to Euro (GBP/EUR) exchange rate higher heading into the weekend.

Hannah Wilson

Contact Hannah Wilson