No-Deal Brexit Fears Ramp Up Once Again Pushing Pound Sterling to Euro (GBP/EUR) Exchange Rate

Pound to Euro Exchange Rate Falling Again despite Euro’s ECB-Inspired Weakness

Even though the Pound Sterling to Euro (GBP/EUR) exchange rate briefly surged higher last week, the Pound’s (GBP) recovery attempt and the Euro’s (EUR) weakness on European Central Bank (ECB) were not enough to keep the pair higher.

After opening last week at the interbank level of 1.11, GBP/EUR climbed in the middle of the week in reaction to UK politics and ECB news. GBP/EUR touched on a high of 1.12, but in the end the pair was unable to hold these gains and ended the week lower.

Since markets opened this morning, GBP/EUR has briefly touched on a weekly low of 1.10. The pair continues to trend relatively close to these lows at the time of writing.

As Brexit fears return following a brief period of relief last week, they continue to overshadow other aspects of the Pound to Euro outlook, including this week’s upcoming Bank of England (BoE) meeting and Eurozone data.

Pound (GBP) Exchange Rates Tumbles on News of No-Deal Brexit Preparation

In the middle of last week, investors opted to buy the embattled Pound (GBP) back from its cheapest levels in profit taking. There was a limited period of relief as Boris Johnson was confirmed as Britain’s new Prime Minister, bringing an end to a month of uncertainty.

However, within the first few days of the Johnson leadership, Sterling is under pressure once again.

The EU said it would not agree to renegotiate the Brexit withdrawal agreement despite Johnson’s plans for renegotiation, and the Johnson government responded by saying it would not accept a deal that included the Irish backstop.

Over the weekend, the government ramped up its rhetoric by saying that it was increasing preparation for a no-deal Brexit.

This has caused jitters among investors who had hoped Johnson would still try to avoid a no-deal Brexit despite his campaign rhetoric.

According to members of Johnson’s cabinet, the government is now ‘turbo-charging’ no-deal Brexit preparations and is working on the assumption that a no-deal Brexit will become reality. A new round of Sterling woes may be just beginning.

Euro (EUR) Exchange Rates Still Pressured by European Central Bank (ECB) Jitters

The European Central Bank (ECB) held its July policy decision last week, and as expected indicated that it was likely to introduce new easing to monetary policy before the end of the year.

However, ECB President Mario Draghi was actually less dovish than expected during the bank’s press conference.

Draghi said that while the outlook for the Eurozone’s manufacturing sector was concerning, the Eurozone’s economy still had strong support in its job market.

Market expectations for a more aggressively dovish ECB were tempered by his speech, and the Euro (EUR) rebounded a little towards the end of last week. It was able to more easily regain against a broadly weak Pound (GBP).

Still, the Euro remains weak overall amid concerns about Eurozone manufacturing and the possibility of continued slowdown in other aspects of the Eurozone economy.

Pound to Euro (GBP/EUR) Exchange Rate Investors Await Brexit and Eurozone News

The Brexit process is dominating Pound to Euro (GBP/EUR) exchange rate movement today, with investors becoming increasingly anxious about Britain’s new Boris Johnson government aiming for a worst-case scenario no-deal Brexit.

No-deal Brexit jitters are likely to keep pressure on the Pound in the coming days, but GBP/EUR movement could be strongly influenced by Eurozone data in the upcoming sessions as well.

Tuesday will see the publication of the Eurozone’s July business and consumer confidence stats, as well as French growth and German consumer confidence and inflation.

Even more key Eurozone data will come in on Wednesday, including German retail sales, French inflation, and growth, inflation and unemployment rate data for the Eurozone overall.

If upcoming Eurozone data surprises investors, it could influence European Central Bank (ECB) speculation further.

Unless there are surprising Brexit developments this week or an unexpected shift in tone from the Bank of England (BoE) on Thursday, Eurozone data is most likely to cause shifts in the Pound to Euro (GBP/EUR) exchange rate in the coming days.

Josh Jeffery

Contact Josh Jeffery