GBP/EUR Exchange Rate Falls despite Eurozone Economy Showing Signs of Deterioration
The Pound Euro (GBP/EUR) exchange rate is down today and is currently trading around €1.172 on the inter-bank market.
The Euro (EUR) gained on the Pound (GBP) following the publication of the Eurozone CPI figures for February improved at 0.3% against January’s -1.0%. Year-on-year CPI figures, meanwhile, also improved.
Although this represented a slight improvement it was still well below the European Central Bank’s 2% inflation target.
Some of the EUR’s gains, however, were clipped by the release of Italy’s CPI figures which came in below expectation for February. The EU-normalised CPI figures for February also came in at a disappointing -0.3%.
Sterling, however, slipped against the Euro following last night’s parliamentary vote on an extension of Article 50, which won by an overwhelming 413 to 202.
Prime Minister Theresa May must now rally support for yet another Brexit deal, with a vote due to take place on 20 March – just 9 days before the Brexit due date on the 29 March.
The Pound is now under increasing pressure as the no-deal Brexit is not technically off the table, as last night’s vote was not legally-binding, meaning that the delay to Brexit now remains up to the 27 EU members to decide.
GBP/EUR Exchange Rate Falls as EU Commission Considers Extension to Article 50
A spokesperson for the European Commission responded to last night’s vote, saying:
‘A request for an extension of Article 50 requires the unanimous agreement of all 27 member states. It will be for the European Council to consider such a request, giving priority to the need to ensure that functioning of the EU institutions … President Juncker is in constant contact with all leaders.’
However, with the divisions within Parliament on display following this week’s series of votes, some Pound investors are remaining wary regarding May’s Brexit deal, which has already been rejected twice.
The Attorney General, Geoffrey Cox, is now attempting to win over Eurosceptics within the Conservative Party along with the DUP in new legal advice. This could be critical to developing a deal that could pass through Parliament on the 20 March.
Cox said that the UK may be able to end the Irish backstop should it show any signs of being ‘socially destabilising’, which would then provide a possibility for the UK to end the backstop.
‘It is in my view clear and undoubted in those exceptional circumstances that international law provides the [UK] with the right to terminate the Withdrawal Agreement. If that were to happen, the [UK] would no doubt offer to continue to observe the unexhausted obligations in connection, for example, with citizens’ rights.’
GBP/EUR Outlook: UK-EU Brexit Extension in Spotlight
Euro traders will be looking ahead to Monday’s publication of the seasonally-adjusted Eurozone trade balance figure for January, and with any signs of improvement this could prove EUR-positive.
Pound investors, meanwhile, will be looking ahead to Tuesday next week which will see the release of the UK ILO unemployment rate figures for January, which are expected to hold steady at 4%.
The GBP/EUR exchange rate will, however, remain dictated by Brexit developments in the coming week as Wednesday will see a third ‘meaningful vote’ on Theresa May’s Brexit deal, while many traders will also be awaiting news from the EU regarding a possible extension to Article 50.