GBP/EUR Kept Under Pressure by Political Jitters despite Euro Weakness

Pound to Euro Exchange Rate Remains Unappealing even as Euro Support Weakens

UPDATE: Before markets closed for the week, the Pound Sterling to Euro (GBP/EUR) exchange rate continued to trend just below the week’s opening levels, on track for its sixth consecutive week of losses.

This was despite a lack of solid support for the Euro (EUR).

The morning’s Eurozone budget hopes only offered the shared currency a small boost, and stronger demand for the US Dollar (USD) in the afternoon put fresh pressure on the Euro.

Pound to Euro Exchange Rate Could Be in For Sixth Consecutive Week of Losses

UPDATE: If the Pound Sterling to Euro (GBP/EUR) exchange rate fails to hold its ground for the remainder of Friday’s session, it would mark the sixth consecutive week of losses for the pair.

Despite political uncertainty weighing on the Pound (GBP) though, investors have been hesitant to buy the Euro (EUR) much either.

The Euro struggled to benefit from the morning’s Eurozone budget hopes, as other officials indicated it was just a small step for the process and that many significant obstacles remained.

Pound to Euro (GBP/EUR) Exchange Rate Fails to Sustain Gains as Political Concerns Persist

With both the Pound (GBP) and Euro (EUR) putting on a mixed performance on economic and political uncertainties, the Pound Sterling to Euro (GBP/EUR) exchange rate has been left fluctuating.

After opening the week at €1.12, GBP/EUR  briefly touched on its worst levels since January.

The Euro (EUR) found some fresh support this morning amid news of EU budget progress.

The Pound (GBP), on the other hand, is seeing mixed reaction to developments in the UK Conservative Party leadership contest.

Pound (GBP) Exchange Rates Find Brief Support following Johnson Victory

This week the UK Conservative Party officially began its contest to replace Theresa May as party leader and the Prime Minister.

Analysts have forecast that prominent Brexiter Boris Johnson is the most likely to win the contest and be the next PM – and his performance in the first round was even stronger than expected.

This had a mixed impact on the Pound, however. While the high likelihood of his win has halted the uncertainty that was weakening Sterling, a Johnson leadership would also keep investors anxious about the possibility of a no-deal Brexit becoming reality.

Johnson has said he will take Britain out of the EU in October, with or without a deal. A no-deal Brexit is still perceived by markets as bad for the UK economy.

Euro (EUR) Exchange Rates Supported by Hopes for Progress in Eurozone Reform

Demand for the Euro (EUR) was a little stronger this morning, keeping pressure on the GBP/EUR exchange rate and preventing it from sustaining any meaningful gains.

This was due to numerous factors, such as recent weakness in the Euro’s rival the US Dollar, as well as a lack of dovish rhetoric from the European Central Bank (ECB)

News of fresh progress on ongoing plans to reform the Eurozone and introduce a new Eurozone budget did bolster Euro support slightly this morning though.

According to French Finance Minister Bruno Le Maire, an agreement had been reached on the broader outlines of a potential budget, following hours of talks.

However, with much work likely still ahead and concerns about the Eurozone’s economy persisting, the Euro’s (EUR) reaction to the news was limited.

Pound to Euro (GBP/EUR) Exchange Rate Traders Anticipate Eurozone Inflation Report

With the Conservative Party leadership contest set to continue throughout the remainder of the month and no solid developments in Brexit expected until the contest is over, the Pound Sterling to Euro (GBP/EUR) exchange rate may be left trading statically.

That being said, there are several notable Eurozone ecostats due out over the next week, starting with labour cost and wage growth stats on Monday.

The Eurozone’s final May Consumer Price Index (CPI) inflation report (due out on Tuesday) may have the most notable impact on GBP/EUR exchange rates.

If Eurozone inflation is weaker than forecast, it would put additional pressure on the ECB to take a more dovish stance on monetary policy.

A stronger-than-expected inflation rate would have the opposite effect, taking pressure off the ECB and allowing the Euro to rise.

Other key data that could influence the Pound to Euro (GBP/EUR) exchange rate next week includes Eurozone economic sentiment data from ZEW, Eurozone consumer confidence, and Markit’s Eurozone PMI projections for June.

Josh Jeffery

Contact Josh Jeffery