GBP/EUR Exchange Rate Sags as Brexit Uncertainty Grows
The Pound Euro (GBP/EUR) exchange rate continued to trend lower last week as investors remained wary of the UK currency in the build up to a key House of Commons vote on Theresa May’s Brexit deal.
However, despite concerns that a likely loss would increase the risks of a no-deal Brexit, Sterling was still able to enjoy a brief rally through the middle of last week’s session after the government suffered a series of defeats in the Commons, granting MPs a greater say over Brexit in the event that the deal is rejected.
This coincided with some mixed data from the Eurozone last week, which saw the Euro struggle in the middle of the session.
It didn’t take EUR exchange rates long to bounce back however, with the single currency rallying sharply on Friday as Germany’s ruling CDU party voted that pro-EU, ‘Merkel lite’ Annegret Kramp-Karrenbauer would replace Chancellor Angela Merkel as leader of the party.
Pound Euro (GBP/EUR) Exchange Rate Weakens as UK Growth Remains Subdued
The Pound Euro (GBP/EUR) exchange rate is off to a poor start this week, with the pairing striking a new two-month low after some disappointing UK GDP figures this morning.
According to data published by the Office for National Statistics (ONS) the UK economy only grew 0.1% in October, resulting in the three-month average slowing from 0.6% to 0.4%.
The slowdown is a worrying sign for GBP investors as it indicates that the UK economy will have struggled through the final quarter of 2018.
The accompanying trade figures proved to be equally disappointing, with September’s deficit being revised up from -£0.027bn to -£2.331bn resulting in some analysts suggesting the UK’s third quarter GDP could be revised down.
In addition to lacklustre #UK #GDP #growth of 0.1% month-on-month in October, there is a significant risk that Q3 GDP growth of 0.6% q/q could be revised down as the #ONS significantly revised up the #trade deficit in Q3. https://t.co/x6ZZkGrTZK
— Howard Archer (@HowardArcherUK) December 10, 2018
GBP/EUR Exchange Rate Forecast: Brexit Vote Defeat to Prompt Rout in Sterling Tomorrow?
Looking to the rest of this week’s session, the main catalyst for movement in the Pound Euro (GBP/EUR) exchange rate will undoubtedly be Tuesday’s Brexit vote.
This may to result in some dramatic losses in Sterling as an expected defeat for the government is likely to greatly increase the chances of a no-deal Brexit.
Petr Krpata, CFA Chief EMEA FX and IR Strategist at ING suggests:
‘The likely loss in the Parliament vote (potentially by a large margin), accompanied by the growing risk of a leadership challenge or a no-confidence vote should be all GBP negative and send EUR/GBP above 0.9000 this week.’
Meanwhile EUR investors will be focused on Thursday’s rate decision by the European Central Bank (ECB), with the Euro potentially weakening if the recent run of data that suggests a slowdown in the Eurozone leads to the bank striking a more dovish tone in regards to a possible rate hike in 2019.