Pound Sterling to Euro (GBP/EUR) Exchange Rate Climbs on Strong UK Data, Brexit Speculation

Pound to Euro Exchange Rate Benefits from Decade-High UK Wage Growth

UPDATE: While Brexit uncertainties are denting market optimism in Sterling, today’s UK job market report did bolster demand for the Pound to Euro (GBP/EUR) exchange rate.

Not only did Britain’s unemployment rate unexpectedly improve to 4.0%, but average earnings including bonuses unexpectedly rose to 3.4%.

This was the lowest jobless rate since 1975 and the highest pace of wage growth in a decade.

On top of this, speculation that Parliament could see a vote on whether or not to offer the public a second referendum also bolstered Sterling (GBP) demand today.

Pound to Euro (GBP/EUR) Exchange Rate Fails to Hold Best Levels as Brexit Uncertainties Dominate

Last week’s UK political and Brexit developments left investors more hopeful that a no-deal Brexit could be avoided, but as uncertainties persist the Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to hold onto its gains.

GBP/EUR actually gained over a cent last week, even if it was unable to sustain the high of €1.14 seen on Thursday night. This marked the best level in two months.

Since markets opened this morning, GBP/EUR has continued to slide, having shed around 0.3% at the time of writing. A lack of fresh support for Sterling (GBP), as well as a rebound in demand for the Euro (EUR), caused the movement.

Throughout last week, investors bought the Pound on speculation that Parliament would work to stop a potential no-deal Brexit from happening, as well as signs that a general election was unlikely.

However, as cross-party Brexit negotiations were perceived as having seen little progress since they began last week, the Pound slipped back from its best levels as it was pushed lower by a slightly stronger Euro.

Pound (GBP) Exchange Rates Lacking Drive to Push Higher

Demand for the Pound (GBP) briefly surged last week, as the UK government’s position on Brexit was defeated by a significant margin and Parliament was given a stronger influence over how the Brexit process would unfold.

As most MPs seemed strongly opposed to the possibility of a no-deal Brexit, this bolstered hopes that efforts would be made to prevent it.

After a no-confidence vote in the government failed last week too, markets became more hopeful that a general election could be avoided.

With two of the most Pound-negative results now seen as less likely, investors hope that a softer Brexit or even a second referendum would become more of a possibility.

However, the Pound’s gains were capped and the currency was unable to hold onto its best levels, as a lack of progress in cross-party talks as well as signs that the EU was unwilling to renegotiate worsened concerns that a soft Brexit may not be achieved.

This, combined with comments from UK officials showing hesitance to delay the official Brexit date, has left the Pound unappealing today.

Euro (EUR) Exchange Rates Strengthen as Rivals Weaken

As the Pound (GBP) weakened slightly following last week’s surge, and the US Dollar (USD) was less appealing at the beginning of this week too, the Euro (EUR) benefitted and strengthened.

The US Dollar (USD) is the Euro’s biggest rival, so the currency’s weakness has helped the Euro to rebound slightly.

This was also caused by fresh market demand for riskier currencies. Last week, a brief surge in demand for safe havens left the US Dollar stronger, but signs of optimistic US-China trade news left the US Dollar weaker.

A lack of notable fresh Eurozone data also made the shared currency more appealing to investors, following last week’s slew of underwhelming figures which continued to indicate the Eurozone’s economy was slowing.

Pound to Euro (GBP/EUR) Exchange Rate Traders Anticipate Major Political News

For now, the Pound to Euro (GBP/EUR) exchange rate is likely to keep adjusting without major movements as investors digest the current uncertain status of the Brexit process and anticipate further news.

There is not expected to be another full-day UK Parliament debate on Brexit until next week, meaning the Pound’s potential for movement could be limited with investors holding off in anticipation of major news.

Any signs that the government’s Brexit deal could be changed to make it more agreeable to a larger number of MPs would make Sterling more appealing, as could signs that Parliament may vote in favour of any other soft Brexit or second referendum amendments.

Of course, a lack of notable developments and no new delays to the formal Brexit date could leave Sterling weaker instead as investors would fear that a No-deal Brexit is still a major possibility.

The Euro (EUR), on the other hand, will continue to be influenced by the strength of its rivals like the US Dollar (USD), as well as some upcoming Eurozone ecostats.

Various consumer confidence stats from key Euro area nations and the Eurozone overall will be published in the coming days, with key German and Eurozone inflation data in the second half of the week likely to influence the Pound Sterling to Euro (GBP/EUR) exchange rate.

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