GBP/EUR Exchange Rate Stabilises as Gove Rules out Resignation
UPDATE: The Pound Sterling to Euro (GBP/EUR) exchange rate continues to stave off further losses today after Environment secretary Michael Gove ruled out a resignation, helping to bolster confidence in Theresa May’s position as Prime Minister.
Gove is NOT resigning – source close to him says ‘Michael is staying at Defra. He thinks it is important to continue working with Cabinet colleagues to ensure the best outcome for the country’
— Laura Kuenssberg (@bbclaurak) November 16, 2018
However while Sterling is showing signs of recovery today, the UK currency is likely to remain highly sensitive to Brexit headline in the coming days, with the very real possibility of a vote of no-confidence in the PM likely to cap any rally in the Pound.
GBP/EUR Exchange Rate Muted as Markets Brace for Further Brexit Volatility
The Pound Sterling to Euro (GBP/EUR) exchange rate is trading in a narrow range this morning, but as Brexit remains in the spotlight, investors forecast further volatility ahead.
At the time of writing the GBP/EUR exchange rate is holding close to this morning’s opening rate after collapsing roughly two cents on Thursday.
Pound Sterling (GBP) to Face Further Volatility Today?
The Pound (GBP) has found some resilience this morning, holding its ground against the Euro (EUR) and its other peers after suffering a battering in currency markets on Thursday.
However observers warn this may simply be the calm before the storm as recent headlines appear to indicate that a vote of no-confidence in the Prime Minister may be imminent.
Sky sources: All government whips have been told to cancel any engagements today and return to London as a source close to the whip's office says a no confidence vote in the Prime Minister is now "likely"
— Sky News Breaking (@SkyNewsBreak) November 16, 2018
This comes as rumours continue to circulate that Theresa May could face additional Cabinet resignations, after both Brexit Secretary Dominic Raab and Work and Pensions Secretary Esther McVey resigned in protest at the draft Brexit deal yesterday.
All these factors are feeding into investor concerns regarding Sterling, with analysts predicting Thursday’s losses may only be the tip of the iceberg if the risks of a no-deal Brexit continue to escalate.
Ulrich Leuchtmannan, FX strategist at Commerzbank suggests:
‘As long as ‘no deal’ remains as likely as it is, there is a risk of a sterling depreciation spiral that is self-intensifying. Sterling volatility has woken up from its 100-year slumber and is likely to remain reactive.’
Euro (EUR) Exchange Rates Buoyed as Draghi Unfazed by Soft Eurozone Data
At the same time the Euro (EUR) has firmed this morning in the wake of a speech by European Central Bank (ECB) President Mario Draghi.
Speaking in Frankfurt this morning, Draghi struck a confident tone as he shrugged off the Eurozone’s recent run of lacklustre data.
While Draghi admitted that recent economic data has been ‘weak’ he stated that the risks to growth remain ‘broadly balanced’, indicating that the ECB will push forward with plans to wind down its quantitative easing programme by the end of the year.
Draghi attributed his upbeat outlook to the Eurozone’s robust labour market as he suggested it was now strong enough to bolster growth and ensure inflation remains at the ECB’s 2% target.
GBP/EUR Exchange Rate Forecast: Brexit Risks to Cloud Sterling for Some Time to Come
Looking ahead, movement in the Pound Euro (GBP/EUR) exchange rate is likely to remain dominated by Brexit sentiment for the foreseeable future, especially in the face of limited UK economic data next week.
Meanwhile the focus for EUR investors next week is likely to be on the Eurozone’s latest PMI estimates, with the Euro likely to weaken if growth in the bloc’s private sector continued to slow this month.