Pound Euro (GBP/EUR) Crashes 1.8% as UK Attorney General Geoffrey Cox Pours Cold Water on Theresa May’s Brexit Agreement
UPDATE: Only a few minutes ago the UK Attorney General Geoffrey Cox issued a statement detailing his legal advice on whether the changes secured by Theresa May to her Brexit withdrawal agreement were legally binding.
Cox concluded that the UK would not unilaterally be able to put an end to the Irish backstop, with his advice likely to cause severe repercussions for this evening’s parliamentary vote.
At the time of writing the Pound is trading at €1.1566 against the Euro.
Hopes of Brexit Progress Boost GBP/EUR Exchange Rate Today
UPDATE: Reports that Theresa May could fly to Strasbourg this evening for fresh talks with European Commission President Jean-Claude Juncker helped Pound Sterling (GBP) rally.
Hopes of an imminent breakthrough in Brexit discussions saw the GBP/EUR exchange rate return to a positive footing this afternoon.
Although it remains to be seen whether Theresa May can secure sufficient support for her proposed deal the prospect of an agreement between the two sides was still enough to boost the Pound.
Pound Sterling Euro (GBP/EUR) Exchange Rate Fails to Capitalise as German Industrial Production Falls
A surprise contraction in German industrial production was not enough to shore up the Pound Sterling to Euro (GBP/EUR) exchange rate this morning.
Although production unexpectedly declined -0.8% on the month in January, following on from an underwhelming December figure, this failed to drag down the Euro (EUR).
Germany’s latest raft of trade data offered investors some encouragement, even though the surplus failed to widen as far as forecast.
As export volumes avoided a decline in January this encouraged the single currency to remain on a stronger footing against its rivals, in spite of lingering worries over the economic outlook.
Worries over Brexit Limit GBP Exchange Rate Support
The mood towards Pound Sterling (GBP), meanwhile, remained muted thanks to the ongoing lack of clarity over Brexit.
As officials failed to make any progress on the Irish border issue over the weekend, leaving Theresa May will no new deal to put before MPs, this limited the appeal of the Pound.
With tension mounting ahead of the critical parliamentary votes on May’s deal and the potential extension of Article 50 support for GBP exchange rates has proven limited.
Even though markets still see limited odds of a no-deal Brexit the continued sense of uncertainty over the UK’s future relationship with the EU continues to diminish the appeal of the Pound.
Improved UK Growth to Limit Pound Sterling’s (GBP) Brexit Downside
While Brexit is likely to dominate the outlook of the GBP/EUR exchange rate in the days ahead tomorrow’s UK gross domestic product data could still offer the Pound a rallying point.
Forecasts point towards the economy recovering some of its lost momentum, rebounding from December’s -0.4% month-on-month contraction.
Although the monthly inflation reading remains volatile any signs of increased growth could encourage the Pound to return to a stronger footing in the short term.
Evidence that the economy is on track to record stronger growth over the first quarter of 2019 would give investors fresh incentive to favour the Pound, even in the face of Brexit-based uncertainty.
Weakening Eurozone Production to Increase Pressure on Euro (EUR)
Wednesday’s Eurozone industrial production data could put fresh pressure on the Euro, on the other hand, if the data follows the lead of today’s disappointing German figures.
Further evidence of a slowdown in industrial output would exacerbate worries over the outlook of the Eurozone economy, with global trade tensions already dragging on growth.
However, if the Eurozone manufacturing sector shows signs of shrugging off the weakening global trade outlook this may prompt the GBP/EUR exchange rate to extend its downtrend further.
With the European Central Bank (ECB) already adopting a cautious economic outlook any fresh signs of a slowdown would weigh heavily on the single currency.