GBP/EUR Exchange Rate Rebounds From Last Week’s Slump

Pound to Euro Exchange Rate Climbs Despite Lack of Fresh Developments

UPDATE: Investors bought the Pound Sterling to Euro (GBP/EUR) exchange rate on Monday, as investors digested last week’s chaotic Brexit news and settled higher on the embattled Pound (GBP).

While analysts were concerned what long-term Brexit uncertainty could mean for Britain’s economy, some perceived last week’s Pound losses as having been overdone.

This made it easier for the currency to rebound slightly today. As Euro (EUR) investors awaited the next influential Eurozone data, it lacked the drive to hold its best levels.

Pound to Euro Exchange Rate Struggles to Gain amid Risk-Sentiment

Despite investors becoming more optimistic about the Pound’s potential for gains following last week’s six-month Brexit time out, the Pound Sterling to Euro (GBP/EUR) exchange rate promptly sunk and remains low today.

GBP/EUR tumbled amid last week’s Brexit developments, opening the week at the interbank level of €1.16 and closing almost half a cent lower, in the region of €1.15.

Before markets closed on Friday, GBP/EUR briefly touched its worst levels in around three weeks – since the end of March.

This week so far, GBP/EUR has attempted to advance but lacks the drive to sustain notable gains.

Uncertainty over how the Brexit process will change over the next six months, as well as some hopes that the Eurozone’s economic activity is showing signs of improving, have limited potential for the Pound to Euro exchange rate to gain.

Pound (GBP) Exchange Rates Unappealing on Delay for Brexit Clarity

While investors are generally relieved that a no-deal Brexit has been avoided for now, news that the process has been delayed has left markets in a mixed mood regarding the Pound (GBP) since last week.

While the British government failed to negotiate a shorter delay until May or June, the agreed ‘flexible extension’ means that Britain could leave the EU sooner than October if a deal is agreed.

It also means that, for businesses, Britain is in for months more Brexit uncertainty as Parliament attempts to find a resolution to the impasse.

A no-deal Brexit has been prevented for now, but the threat has merely been kicked down the road. With no solution to Brexit yet in sight, markets expect months of uncertainty for the Pound.

Euro (EUR) Exchange Rates Gain on Signs of Eurozone Strength

As well as Brexit uncertainty weighing on the Pound’s (GBP) strength last week, the Euro (EUR) has recently benefitted slightly from data indicating that the Eurozone economy may be recovering slightly from months of slowdown.

Despite a generally cautious and even dovish European Central Bank (ECB) last week, the Euro has been resilient thanks to some signs of recovering Eurozone sentiment, as well as weakness in rivals.

German and French inflation data met expectations last week, but factory data published on Friday beat forecasts.

German wholesale price stats from March rose from 1.6% to 1.8% year-on-year, while Eurozone industrial production saw a smaller contractions than forecast.

Eurozone industrial production was forecast to slump to -1.0% year-on-year, but instead was trimmed to -0.3%. The monthly figure only fell to -0.2% rather than the expected -0.6%.

On top of this, as well as weakness in the Pound (GBP), the Euro has strengthened thanks to risk-sentiment keeping its rival, the US Dollar (USD), weaker as well.

Pound to Euro (GBP/EUR) Exchange Rate Investors Await Data as UK Parliament goes on Recess

As Parliament has risen to observe the Easter recess period, analysts do not expect many major Brexit developments over the next week or so.

Unless there is surprising news regarding talks to reach a compromise between Prime Minister Theresa May and opposition Leader Jeremy Corbyn, Pound (GBP) investors are more likely to turn their attention towards upcoming data.

Analysts will be looking for signs of resilience in Britain’s economic activity, amid expectations that Brexit uncertainties will be dragging on the economy for many more months.

As a result, tomorrow’s UK job market report, Wednesday’s inflation stats and Thursday’s retail sales results may all prove influential if they surprise Pound investors.

Data is even more likely to be influential if investors spot any signs of recovery from the Eurozone’s recent economic slowdown.

The Euro could see a boost in demand if tomorrow’s economic sentiment data from ZEW beats expectations.

Eurozone inflation data could prove to be key if it surprises investors, as this could influence European Central Bank (ECB) interest rate hike bets and the Pound to Euro (GBP/EUR) exchange rate outlook.

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