Pound Nears Three-Month Low against Euro as UK Political Fears Continue to Mount

Pound to Euro (GBP/EUR) Exchange Rate Continues to Fall into Fresh Weekly Lows amid Brexit Fears

UPDATE: Mounting fears that UK Prime Minister Theresa May will either step down or be ousted without making significant progress in Brexit is leaving the Pound (GBP) highly unappealing today.

Expectations are rising that June will come and go without there being any firm path for Brexit to take, and an expected change of leadership has only worsened market uncertainty.

Analysts are saying that the chances of a no-deal Brexit are rising again, on fears that the next leader will also fail to push a solution through Parliament and the clock on Brexit will simply be run down.

The Euro (EUR) has been able to more easily benefit from the Pound’s weakness, as today’s data showed an improvement in the French unemployment rate.

Pound to Euro Exchange Rate Tumbles Further on Revived No-Deal Brexit Fears

UPDATE: While there have been no major or surprising developments in Brexit over the past week, investors are becoming gradually more anxious about the stability of UK politics and this led to fresh Pound to Euro (GBP/EUR) exchange rate losses on Wednesday afternoon.

According to UK Brexit Minister Stephen Barclay, the chances of a no-deal Brexit are underappreciated. He argued it was unlikely that Brexit would be delayed again.

This, as well as eroding support for UK Prime Minister Theresa May, has left the Pound (GBP) highly unappealing.

Pound to Euro Exchange Rate Begins to Climb as Economic and Political Concerns Still Weigh on Euro

UPDATE: Despite a lack of fresh support for the Pound (GBP), as well as this morning’s Eurozone data being generally optimistic for the bloc’s economic outlook, the Pound Sterling to Euro (GBP/EUR) exchange rate edged away from its worst levels.

Investors remain anxious about the Eurozone outlook, due to revived US-China trade war fears, as well as concerns about political tensions between Italy and the EU.

Still, GBP/EUR gains were limited as Eurozone employment change data did beat expectations slightly year-on-year.

Pound to Euro Exchange Rate near Worst Levels despite Mixed Euro Strength

A lack of solid optimism in the Brexit process, as well as some fresh signs of resilience in the Eurozone economic outlook, has meant the Pound Sterling (GBP/EUR) exchange rate continues to trend near its lows today.

Following last week’s significant GBP/EUR plunge of almost two cents, the pair has seen further losses this week.

This morning, the GBP/EUR interbank level is trending in the region of €1.15, which was the pairing’s worst level for almost three months.

Many of the Brexit hopes that had supported the Pound (GBP) in recent weeks have largely evaporated, as investors become more anxious about the stability of UK politics.

As some key Eurozone data prints above expectations, GBP/EUR is being kept under pressure, and more Eurozone data due towards the end of the week could push GBP/EUR lower still if it impresses.

Pound (GBP) Exchange Rates Limp as UK Government’s Brexit Deal Set for Return

Despite having been voted down three times already, the government today announced that its long-negotiated Brexit deal will once again face Parliament in early June.

The government has been holding cross-party Brexit negotiations with the opposition Labour Party, but will put a deal to Parliament, whether or not it has reached a cross-party agreement by then.

The government has warned that if the deal is blocked again, it could lead to a no-deal Brexit, or to Article 50 being revoked entirely.

Either way, amid continued objection to the plan from hard-Brexit supporting Conservative Party MPs, as well as from the opposition Labour Party, the bill is already expected to be defeated again.

The government’s announcement this morning only made Pound investors more anxious that months of more Brexit uncertainty is on the way.

Euro (EUR) Exchange Rates Supported by Resilience in Eurozone Economy

Following months of concerns that Germany’s economy could slip into recession after being hit by slowing global growth, today’s growth rate results put some market jitters to rest.

Germany’s Q1 Gross Domestic Product (GDP) growth rate projections met analyst expectations, showing a solid rebound from the poor performance seen at the end of 2018.

Growth rebounded from 0.0% to 0.4% quarter-on-quarter according to the projection, while yearly growth edged higher from 0.6% to 0.7%.

According to Carsten Brzeski, Chief Economist at ING:

‘Today’s GDP data is balm for the soul of the German economy. It also confirms our long held view that not all is bad in the German economy. Some of last year’s one-off factors have turned around,’

So while the German data was unsurprising it was still a relief for Euro (EUR) investors.

This morning’s French inflation stats gave the Euro further support, with April’s inflation rate figures beating expectations in both monthly and yearly prints.

Pound to Euro (GBP/EUR) Exchange Rate Could Slide Further if Eurozone Inflation Impresses

The Pound to Euro (GBP/EUR) exchange rate is already trending close to its recent lows due to concerns about how more Brexit uncertainty could negatively impact Britain’s economic outlook, but could still see further losses before the end of the week.

Eurozone trade balance data and France’s Q1 unemployment rate report will be published tomorrow, but the most influential Eurozone data will come in on Friday.

April’s final Eurozone Consumer Price Index (CPI) inflation rate report is expected to show that inflation rose solidly last month, and if it impresses the Euro (EUR) could see further late-week gains.

However, the Euro could weaken and make it easier for GBP/EUR to recover if inflation falls short, as this would douse European Central Bank (ECB) interest rate hike bets.

No notable UK data will influence the Pound to Euro (GBP/EUR) exchange rate in the coming sessions, but the Pound (GBP) could certainly be driven by any fresh developments in UK politics or Brexit.

Josh Jeffery

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