Pound to Euro Exchange Rate Fails to Recover from Yesterday’s Brexit-Based Plummet
Investors sold the Pound (GBP) en masse yesterday, in reaction to Monday comments from Britain’s next potential Prime Minister that worsened no-deal Brexit fears – and this led to significant Pound Sterling to Euro (GBP/EUR) exchange rate losses.
Following last week’s mixed GBP/EUR movement that saw the pair trending within a relatively narrow region near the interbank level of 1.11, the pair has seen sharper movement this week so far.
GBP/EUR has already shed around a cent since markets opened, and at the time of writing on Wednesday morning the pair was trending just above a 2019 low of 1.10. It was the worst level for the pair since December 2018.
The primary cause of Pound to Euro exchange rate losses was Sterling’s broad weakness, as market uncertainty over the Eurozone’s economic outlook kept the Euro (EUR) from capitalising.
Pound (GBP) Exchange Rates Fail to Find Support in Inflation Rate Data
The Brexit battered Pound (GBP) failed to find any support in Britain’s latest ecostats, as this morning’s UK Consumer Price Index (CPI) inflation rate figures were largely unsurprising.
UK inflation met forecasts in major prints, with the monthly inflation hitting a stagnant 0.0% as expected, while the yearly figure edged higher to 1.8%.
Some analysts reacted to the news by noting that inflation remained fairly close to the Bank of England’s (BoE) targets, and that there was not much case for an interest rate cut just yet.
However, the Pound remained highly unappealing despite this. The day’s London housing data disappointed markets, and investors remained overall anxious about Britain’s outlook due to rising no-deal Brexit fears.
The cause of the Pound’s plummet yesterday was reaction to comments from the frontrunner to be Britain’s next Prime Minister, Boris Johnson.
Johnson indicated that he would not accept any EU deal that included the controversial Irish backstop. Speculation also rose that Johnson may attempt to prevent any Parliament plans to block a no-deal Brexit.
Euro (EUR) Exchange Rates Edge Higher as Eurozone Inflation Stronger than Projected
The Euro (EUR) was unable to capitalise on the Pound’s (GBP) weakness yesterday, as concerns about the Eurozone’s economic outlook kept European Central Bank (ECB) easing speculation in focus and left the shared currency unappealing.
Markets are especially anxious about the strength of Germany’s economy, as Germany is the biggest economy in the Eurozone.
Yesterday’s German economic sentiment and current conditions surveys from ZEW saw unexpectedly deep contractions, leaving investors anxious that there were no signs of recovery in Germany’s economic outlook.
However, after being sold on German data yesterday, the Euro has found a little fresh support this morning.
The Eurozone’s final June inflation rate report was a little stronger than projected in both monthly and yearly figures.
Monthly inflation unexpectedly rose from 0.1% to 0.2%, while the yearly figure rose to 1.3%.
Still, the data’s impact on the Euro was limited as the rate remained well below the ECB’s target rates.
Pound to Euro (GBP/EUR) Exchange Rate’s Potential for Recovery Limited amid Brexit Jitters
The rest of the week’s economic calendar will be a little quieter. Typically influential UK retail sales data will be published tomorrow, with German PPI and UK public sector net borrowing data due on Friday.
While there is still some key UK data due for publication in the coming days though, the Pound (GBP) may not see much in the way of gains even if they impress.
Investors remain too focused on Brexit uncertainties and rising no-deal Brexit fears dominating Britain’s outlook.
Those no-deal Brexit fears are due largely to the wide expectation that Brexiteer Boris Johnson will win the Conservative Party leadership contest and become Prime Minister in the coming weeks.
Any surprising comments from Johnson regarding Brexit are likely to be the focus for Pound to Euro (GBP/EUR) exchange rate investors for now, at least until next week’s key Eurozone data and European Central Bank (ECB) policy decision.