Pound to Euro Exchange Rate Remains near Lows as No-Deal Brexit Fears Bubble Up
Despite signs of weakness in the Eurozone’s economic outlook and some key prints disappointing investors, the Pound Sterling to Euro (GBP/EUR) exchange rate saw yet another week of losses last week. This week the pair could rise if more Eurozone data disappoints.
GBP/EUR movement has been subdued in recent weeks, as the pair has fallen to near its worst levels since January but investors are hesitant to sell it much further or buy it much higher.
While modest, GBP/EUR saw another consecutive week of losses and edged lower within the interbank region of 1.11 last week. At the time of writing, GBP/EUR was trending just below the week’s opening levels.
GBP/EUR did recover slightly after last week’s worst levels, but as political and no-deal Brexit fears continue to dominate the Pound (GBP) outlook, the pair continues to trend with a downside bias.
Pound (GBP) Exchange Rates under Pressure as No-Deal Brexit Fears Dominate
Investors have had little reason to buy the Brexit-battered Pound (GBP) over the past week, and despite weakness in the Euro (EUR) that appears unlikely to change any time soon.
Last week saw a rise in concerns that both potential candidates to be Britain’s next Prime Minister were seriously considering the possibility of a no-deal Brexit outcome.
Those fears have only persisted, as over the weekend frontrunner Boris Johnson pledged to enact Brexit by the 31st of October ‘come what may’.
He said the UK would be ready for a no-deal outcome, causing further market concern that there would not be another delay to the process.
The perceived chances of his opponent, Jeremy Hunt, winning the leadership contest have also lightened. This further disappointed Pound investors as Hunt was seen as having a comparatively softer Brexit stance.
Political fears combined with concerning contractions in UK data last week, leaving Brexit uncertainty to dominate both the political and economic outlooks.
Euro (EUR) Exchange Rates Struggle to Advance as Eurozone Data Remains Mixed
While the Pound (GBP) is seeing persistent no-deal Brexit fears, the Euro (EUR) has failed to capitalise on this as Eurozone data remains too underwhelming to offer the shared currency much support.
For most of last week, demand for the Euro was limited as key Eurozone data was mixed and the latest European Central Bank (ECB) developments had little overall impact on the Euro outlook.
The Euro weakened a little towards the end of last week as German construction and factory orders data disappointed investors and led to fresh European Central Bank interest rate cut bets.
Today’s Eurozone data has only given investors an even more mixed outlook on the currency.
German trade data as optimistic, with exports coming in at an unexpectedly strong 1.1%. However, Germany’s May industrial production report fell short of the expected 0.4% and only rose to 0.3%.
Pound to Euro (GBP/EUR) Exchange Rate Focused on Central Bank Bets
With European Central Bank (ECB) interest rate cut bets rising in recent weeks on concerning Eurozone data, these are likely to drive the Euro’s (EUR) movement in the coming sessions as well.
Key Eurozone data due towards the end of the week, including German and French inflation data on Thursday and Eurozone industrial production on Friday, could drive ECB monetary policy bets if they surprise investors.
German price pressures could be particularly influential for Eurozone monetary policy speculation.
If the data falls short of expectations, investors will be even more convinced that the ECB could ease monetary policy a notable amount before the end of the year. Bets of a July interest rate cut may even rise.
As for the Pound (GBP), investors continue to anticipate UK political developments.
On top of this, after last week’s poor UK data caused Bank of England (BoE) interest rate cut bets to rise, disappointing growth data on Wednesday could cause rate cut bets to rise further and the Pound to Euro (GBP/EUR) exchange rate could fall.