Pound Sterling to Euro (GBP/EUR) Exchange Rate Advance Continues as Eurozone Data Remains Unimpressive

Pound to Euro (GBP/EUR) Exchange Rate Still Climbing Despite Uncertainty over Brexit Process Direction

A lack of fresh reasons to buy the Euro (EUR) this week has made it easier for the Pound Sterling to Euro (GBP/EUR) exchange rate to sustain gains and climb further, despite broad uncertainty regarding the path the Brexit process will take next.

Since opening this week at the level of €1.1196, GBP/EUR has spent most of the week climbing on weak Eurozone data and speculation that the Brexit process could be delayed.

At the time of writing today, GBP/EUR was trending closely to a two-month-high. Notably, this was also the first time that the GBP/EUR interbank rate had reached above the key €1.13 level since November.

Investors have been buying the Pound (GBP), despite Brexit uncertainties, due to rising expectations that the formal Brexit date will be delayed.

This made it easier for Sterling to gain against the Euro, which has been weighed by damp Eurozone data, as well as stronger market demand for major rivals like the US Dollar (USD).

Pound (GBP) Exchange Rates Benefit from Expectations of Brexit Delay

This week’s Brexit news may have confirmed that UK Prime Minister Theresa May’s soft Brexit plan was doomed and has thrown the Brexit process into a new era of uncertainty, but despite this the Pound (GBP) has gradually climbed against a weak Euro (EUR).

This is partially because the defeat of UK Prime Minister Theresa May’s Brexit bill has left an increasing number of officials and analysts concerned that there would not be enough time to prepare for Brexit unless the formal date of leaving was pushed back.

Brexit is still scheduled to occur on 29 March, but a rising number of investors are now taking a delay for granted. Pricing a delay into the Pound has been one of the primary causes of the British currency’s gains this week.

Of course, the Pound’s appeal has been limited by the significant uncertainties still surrounding Brexit.

While there are hopes that Parliament wishes to avoid a no-deal Brexit, it is still unclear what form the process will take next.

Euro (EUR) Exchange Rates Fail to Avoid Losses while Eurozone Data Slows as Expected

This week’s Eurozone data has either met market expectations of weakening or has fallen below analyst forecasts, giving investors little reason to buy the Euro (EUR).

Today, the Eurozone’s final December Consumer Price Index (CPI) report was published. As expected, yearly inflation in the bloc slowed from 1.9% to 1.6% while the monthly figure improved just slightly to a stagnant 0.0%.

It followed German growth and inflation data from earlier in the week, which also both slowed as analysts expected. These figures left the Euro unappealing.

On top of this, investors have found the US Dollar (USD) more appealing due to stronger demand for safe haven currencies amid fresh global trade uncertainties.

As the US Dollar is negatively correlated to the Euro, this has led to weaker Euro performance too.

Pound to Euro (GBP/EUR) Exchange Rate Traders Await Brexit Developments

No more notable Eurozone data will be published until next week, and Friday’s UK retail sales results are unlikely to be particularly influential with Pound (GBP) investors focused so heavily on Brexit news.

As a result, the Pound to Euro (GBP/EUR) exchange rate is likely to be driven by Brexit speculation and news over the coming sessions, though Eurozone data may prove influential next week.

So what are investors looking for in Brexit news? UK Prime Minister Theresa May has begun cross-party talks in order to find some kind of middle-ground on how to adjust her Brexit deal and bolster support for it.

However, with UK political parties seemingly remaining steadfast on their positions, these days are perceived to be unlikely to make a major difference to support for May’s Brexit bill.

Analysts also do not expect Theresa May’s ‘Plan B’ to differ too much from her government’s initial Brexit plan. The government is expected to present some kind of ‘Plan B’ to MPs by Monday.

Unless there are any surprising developments from the UK government regarding how the Brexit process will unfold, Pound to Euro (GBP/EUR) exchange rate traders may look increasingly towards what alternative plans MPs support, with Parliament likely to see more influence in Brexit now.

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