Pound to Euro (GBP/EUR) Exchange Rate Losses Extended amid Fears over UK Government’s Future
UPDATE: The Pound (GBP) has been unappealing all day on concerns that a hard Brexit is becoming more likely, and the Pound to Euro (GBP/EUR) exchange rate’s losses only worsened when the stability of UK politics became even more uncertain.
On Wednesday afternoon, rumours flared up that critics of Prime Minister Theresa May could try to force her out of office much sooner than expected due to a lack of perceived popularity for latest attempt to pass Brexit.
Concerns worsened that a leader who supports a hard Brexit could succeed May if she is ousted.
Pound to Euro Exchange Rate Continues to Tumble amid Fresh UK Economic Concerns
UPDATE: Concerns about the future of UK politics and the Brexit process were already causing Pound to Euro (GBP/EUR) exchange rate losses this morning, but the latest UK economic uncertainties have given investors even more reason to be averse to the Pound.
Today’s UK inflation rate fell short of expectations, but news that UK business British Steel had collapsed was especially concerning for Britain’s business and economic outlook.
GBP/EUR losses deepened around the middle of the day and the pair trended near fresh 3-month-lows.
Pound to Euro (GBP/EUR) Exchange Rate Continues to Fall Ahead of EU Elections
As political uncertainties continued to hit the Pound (GBP) harder than the Euro (EUR), the Pound Sterling to Euro (GBP/EUR) exchange rate fell even further when markets opened this morning and touched fresh lows ahead of tomorrow’s key EU elections.
Since opening this week at the interbank level of €1.13, GBP/EUR has seen mixed movement and has largely drifted higher, briefly testing the level of €1.14.
However, as Brexit fears deepened and the Euro benefitted from stronger-than-expected Eurozone confidence data, GBP/EUR slumped today and the pairing was trending close to its lowest levels since February at the time of writing.
A boost in demand for the Pound yesterday was short-lived, as Prime Minister Theresa May’s new plan on Brexit was quickly perceived as lacking the support it would need to pass.
Pound (GBP) Exchange Rates Slump as UK Prime Minister May’s ‘New’ Brexit Plan Fails to Impress
On Tuesday, UK Prime Minister Theresa May attempted to shore up support for her government’s ill-fated Brexit plans by revealing details of a new spin to the plan.
This ‘new’ plan included features such as using technology to overcome the obstacle of the controversial Irish backstop, as well as offering Parliament an official vote on a second referendum.
Investors briefly backed the Pound (GBP) in reaction to the news on hopes there would be a second referendum of some kind.
However, Sterling’s appeal was limited by criticism of the plan by the Prime Minister’s own cabinet, as well as from the opposition Labour Party, which dampened hopes that the bill would have much success of passing.
The Pound then slumped as investors expected this plan to fail as well, and concerns about the health of the government amid this week’s EU elections and an upcoming leadership contest returned to focus.
Euro (EUR) Exchange Rates More Resilient on Mixed Rival Movement
Demand for the Euro (EUR) has also been mixed as investors are hesitant to make any big movements on the currency ahead of this week’s EU elections.
Analysts fear the EU elections could lead to a surge in Eurosceptic populism, which could lead to concerns about the stability of the Eurozone’s future.
As a result, much of the Euro’s fairly limp movement this week so far has been largely due to reaction to movements in rivals. For example, the Pound’s weakness this morning.
The Euro did find a little support from yesterday’s Eurozone consumer confidence projection from May, which beat expectations and only contracted by -6.5.
Pound to Euro (GBP/EUR) Exchange Rate Traders Await Thursday’s Session
Thursday is likely to be highly significant for the GBP/EUR exchange rate, with most of this week’s most notable Eurozone data being published tomorrow, and the anticipated EU elections taking place.
Citizens all around EU member states will be heading to the polls to vote for parties to represent their nations at the EU.
Due to the UK government’s failure to deliver Brexit so far, the popular Brexit Party is expected to perform very strongly in the UK. There are concerns that other populist Eurosceptic parties in other EU nations will also perform strongly.
As political concerns dominate the Pound’s movement and a strong performance for the Brexit Party could boost the chances of a no-deal scenario, the Pound could be sensitive to the results of the election, which will come in through the weekend.
Meanwhile, the Euro will be influenced by how other Eurosceptic parties perform, but for now tomorrow’s Eurozone data will be more influential.
A slew of stats, including Markit’s May PMI projections, as well as Germany’s final Q1 growth and May’s business confidence stats will all be published. The Euro could strengthen if they impress investors.
Of course, with the stability of Britain’s domestic government in question, the Pound to Euro (GBP/EUR) exchange rate could also be driven by any surprising UK political news.