Pound Sterling to Euro (GBP/EUR) Exchange Rate Edges Away from Worst Levels Despite General Election Fears

Pound to Euro Exchange Rate Losses Limited by European Central Bank (ECB) Concerns and US Dollar (USD) Resilience

UPDATE: While not hugely influential, this morning’s European Central Bank (ECB) meeting minutes report made investors hesitant to buy the Euro (EUR) much more versus a weakened Pound (GBP).

The bank noted that most of the risks to the Eurozone’s economy were to the downside, which made it easier for the Pound Sterling to Euro (GBP/EUR) exchange rate to rebound slightly from its weekly lows.

This was despite fresh concerns that the UK government could face pressure to start another UK general election if next week’s UK Parliament vote on the Brexit deal fails.

Pound to Euro Exchange Rate Unappealing While Euro Benefits from Rival Strength

UPDATE: Demand for the Pound Sterling to Euro (GBP/EUR) weakened further in the early afternoon. Investors continued to sell the Pound (GBP) on jitters ahead of next week’s anticipated UK Parliament Brexit vote.

Markets were unconvinced by UK Prime Minister Theresa May’s attempts to bolster the popularity of her Brexit deal, or by analyst predictions that the chances of a delay to the Brexit process were rising.

The Euro (EUR) easily benefitted from the Pound’s weakness thanks to weakness in its biggest rival, the US Dollar (USD).

Pound to Euro (GBP/EUR) Exchange Rate Continues to Slip on Brexit Uncertainties

UK Prime Minister Theresa May’s Brexit plan has returned to parliamentary debate this week, and it has already caused more weakness for an already volatile Pound Sterling to Euro (GBP/EUR) exchange rate. This has made it easier for a stronger Euro (EUR) to advance.

Last week saw GBP/EUR climb from €1.10 to €1.11, but as of today the pair has already shed all those gains – and then some.

GBP/EUR is on track to have lost over a cent this week, unless the Pound (GBP) becomes more appealing and can recover before markets close tomorrow.

Pound movement may be influenced slightly by Friday’s UK growth results, but it’s more likely that investors will become increasingly focused on next week’s highly anticipated Parliament vote on May’s Brexit deal.

Meanwhile, the Euro has been climbing versus a weaker Pound due to weakness in rivals. The US Dollar (USD) is the Euro’s biggest rival, with the two currencies sharing an inverse correlation. US Dollar weakness has left the Euro stronger.

Pound (GBP) Exchange Rates Limp as UK Government’s Position on Brexit Weakens

No notable UK data has been published this week so far, but market focus remains on the Brexit process regardless.

Since Parliament reconvened this week and the debate on May’s Brexit deal resumed yesterday, headlines have been hit with fresh Brexit uncertainties, with fresh obstacles to May’s Brexit plan emerging too.

Earlier in the week, the government lost a vote as an amendment to limit government funding in the event of a ‘no-deal’ Brexit, and on Wednesday it lost yet another vote.

The latest amendment will demand the government come up with a ‘Plan B’ within days if May’s deal fails to pass next Tuesday.

The amendment was made due to concerns among MPs that the government will attempt to ‘run down the clock’ on Brexit, with less than three months until the UK is set to leave the EU.

As it is still seen as unlikely that the Brexit deal will pass next week, uncertainty about the possibility that the government will lose power over the Brexit process with mere months to go is leaving Sterling (GBP) unappealing.

Euro (EUR) Exchange Rates Bolstered by Weakness in Rivals

As the Pound (GBP) is being pressured by Brexit uncertainties, its rival the Euro (EUR) has gained.

Over the past week, optimistic signs in US-China trade talks have left investors less eager to buy safe haven currencies like the US Dollar (USD).

The US Dollar’s weakness was exacerbated by more signs of dovishness from the Federal Reserve in recent sessions.

The Fed’s latest meeting minutes indicated the bank’s policymakers were uncertain about further US interest rate hikes, due to slowing global growth.

As the Euro is negatively correlated to the US Dollar, this left it much stronger.

The Euro also benefitted from this week’s Eurozone unemployment and retail sales stats which came in well above expectations, despite poor Eurozone consumer confidence and concerns about Germany’s economy.

Pound to Euro (GBP/EUR) Exchange Rate Investors Focus on Politics and Global Developments

Friday will see the publication of Britain’s November growth, industrial production and manufacturing results, but these are unlikely to be particularly influential for the Pound to Euro (GBP/EUR).

If the UK data surprises investors it could cause some Pound (GBP) movement, but investors are more likely to focus on Brexit developments and next week’s anticipated Parliament vote on the Brexit deal.

Theresa May’s long-negotiated Brexit deal will continue to be debated in Parliament over the coming sessions, and any notable Brexit developments will remain influential for the Pound.

Any further complications to May’s plan for a smooth Brexit could worsen market fears of a ‘no-deal’ Brexit and leave Sterling weaker. However, signs that a second referendum of some kind could be possible may leave the Pound more appealing.

The Euro (EUR), on the other hand, will continue to be driven by strength in rivals amid a lack of notable Eurozone data due for publication for the rest of the week.

Unless the US Dollar (USD) or Pound strengthen again, the Pound to Euro (GBP/EUR) exchange rate is on track to end the week lower.


Josh Ferry Woodard

After leaving university in 2011 Josh briefly worked as a currency analyst in the South West of Cornwall. Josh continued monitoring the currency markets and publishing exchange rate analysis after moving to London in 2012, with a particular focus on the impact of economic and political stimuli on forex. Josh was a regular contributor to The Telegraph’s weekly currency feature for several years.

Contact Josh Ferry Woodard