GBP/EUR Exchange Rate Slides on Fresh Brexit Uncertainty
The Pound Sterling to Euro (GBP/EUR) exchange rate is on the defensive the morning, following comments from the Irish Finance Minister warning that the risks of a no-deal Brexit are rising.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1131, down nearly 0.3% this morning and leaving the pairing trading close to a five-month low.
Pound (GBP) Sinks as Ireland Warns of No-Deal Brexit Risks
The Pound (GBP) has been undermined by fresh selling bias this morning, with notable falls against both the Euro (EUR) and US Dollar (USD) following warnings that a no-deal Brexit is looking increasingly likely.
Speaking this morning Ireland’s Finance Minister, Paschal Donohoe stated that is confident that EU leaders will continue to stand by the country in Brexit talks, particularly in regards to the Irish backstop.
The Finance Minister also suggested that Ireland is stepping up its preparation for a no-deal Brexit as the government believes the chances of the UK crashing out of the EU are rising.
‘From the point of view of the Irish government, we now believe that the prospect of a disorderly Brexit occurring is now a significant risk.’
Further denting Sterling sentiment this morning is a recent survey from Bloomberg, in which economists forecast that the UK economy contracted for the first time in seven years in the second quarter, something that could increase the pressure on the Bank of England to lower interest rates.
Euro (EUR) Gains Trimmed by Shock Slump in Italian Retail Sales
At the same time, the Euro (EUR) is facing some headwinds as its advances against the Pound (GBP) this morning, following the release of Italy’s latest retail sales figures.
According to data published by Italy’s statistics agency, ISTAT, after stalling in April, domestic retail sales contracted by 0.7% in May, missing expectations of a modest 0.2% expansions.
Italian retail sales have now failed to expand for four consecutive months, something that is likely to increase concerns over the state of Italy’s economy and the country’s ability to reduce its substantial debt pile at a time when the government wants to increase public spending.
GBP/EUR Exchange Rate Forecast: Could a Rebound in GDP Reverse Sterling’s Fortunes?
Looking ahead to tomorrow, there’s a chance the Pound Euro (GBP/EUR) exchange rate could recoup some of its losses, following the release of the UK’s latest monthly GDP reading.
Economists currently forecast that the UK economy will have expanded by 0.3% in May, rebounding from a contraction in April and potentially lending some support to Sterling.
However any upside in the Pound may prove somewhat limited, with the modest rebound in growth in May unlikely to be enough to dispel concerns that the UK economy will have contracted in the second quarter.
Meanwhile, for EUR investors the focus is likely to be on the publication of the minutes from the European Central Bank’s (ECB) June policy meeting, as they look for any additional hints towards the bank’s plans for momentary policy, particularly in regards to a potential rate cut later in the year.