Pound Sterling to Euro (GBP/EUR) Exchange Rate Remains Under Pressure From Brexit Uncertainties

GBP/EUR Continues to be Subdued as Brexit Pressures Mount

UPDATE: Unless Theresa May can secure agreement reagarding her Brexit proposals today the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to remain on a weaker footing.

As more businesses are likely to begin enacting contingency plans the longer the uncertainty over the UK’s future trade arrangements persists, confidence in the domestic outlook could soon deteriorate.

Pound Sterling Euro (GBP/EUR) Exchange Rate Slips Lower on EU’s Brexit Warning

UPDATE: Earlier comments from the EU’s chief Brexit negotiator Michel Barnier have encouraged the Pound Sterling to Euro (GBP/EUR) exchange rate to extend its losses.

As Barnier warned that there is still a long way to go in Brexit talks and not a lot of time left this exacerbated market worries over the threat of an unsatisfactory final deal.

With hopes for today’s crunch cabinet meeting rather limited, as major divisions among ministers persist, there appears little reason to favour Pound Sterling (GBP) at this stage. As a result, the Pound has slipped around 0.2% against the Euro.

Pound Sterling Euro (GBP/EUR) Exchange Rate Struggles in Light of Bullish German Production Figures

An unexpectedly sharp increase in German industrial production kept the Pound Sterling to Euro (GBP/EUR) exchange rate under pressure on Friday morning.

Confidence in the underlying health of the German economy continued to improve as production rose 3.1% on the year in May.

This encouraged bets that the Eurozone has recovered some of its lost momentum in the second quarter, giving investors fresh reason to buy into the Euro (EUR) ahead of the weekend.

However, the losses of the GBP/EUR exchange rate proved limited thanks to lingering market concerns over rising global trade tensions and anticipation ahead of the latest US jobs data.

Fears over Brexit Political Deadlock Drag on GBP/EUR Exchange Rate

Brexit-based jitters have mounted further today, increasing the downside pressure on the Pound Sterling to Euro (GBP/EUR) exchange rate.

As businesses continued to issue warnings over the negative impact that a hard Brexit scenario might have on their positions in the UK the mood towards Pound Sterling (GBP) has soured.

With both the Jaguar Land Rover and Airbus CEOs signalling that UK jobs may have to go in the event of an unfavourable Brexit deal worries over the future of the economy mounted.

This exacerbated worries ahead of the latest crunch Cabinet talks on the matter of Brexit, especially as ministers still appear at odds over key issues.

News of a further weakening in UK productivity also dented GBP exchange rates on Friday morning.

German Trade Data to Provoke Pound Sterling Euro (GBP/EUR) Exchange Rate Volatility

German trade data could provoke further volatility for the Pound Sterling to Euro (GBP/EUR) exchange rate on Monday.

If the Eurozone’s powerhouse economy continues to display signs of strength this is likely to fuel demand for the Euro.

A widening of May’s trade surplus would give investors fresh cause for confidence, particularly if any improvement is driven by an increase in export volumes.

EUR exchange rates could also benefit if the US softens its trade rhetoric and backs away from the threat of imposing fresh tariffs on EU car imports.

The latest ZEW economic sentiment surveys will also come into focus next week, with investors keen to get another gauge of confidence within the Eurozone economy.

GBP/EUR Exchange Rate to Benefit if UK Data Continues Positive Run

Brexit developments are expected to dominate the outlook of the Pound Sterling to Euro (GBP/EUR) exchange rate over the coming days.

Unless there are signs of progress towards an agreeable final deal with the EU the mood towards the Pound is likely to remain muted.

Even so, if May’s UK production and trade data points towards a strengthening domestic economy this could help to shore up GBP exchange rates on Tuesday.

With markets increasingly betting on the prospect of the Bank of England (BoE) raising interest rates in August the Pound Sterling to Euro (GBP/EUR) exchange rate should maintain some degree of support.

Hannah Wilson

Contact Hannah Wilson