New Post-2017 Worst for Pound to Euro (GBP/EUR) Exchange Rate amid Latest Brexit Fears

Pound to Euro Exchange Rate Tumbles as US-China Trade Jitters Boost Euro

Despite continued signs of weakness in the Eurozone economic outlook, the Pound Sterling to Euro (GBP/EUR) has fallen even lower since markets opened this morning. The pair is being dragged by the latest geopolitical jitters.

Last week ended up being a highly bearish week for GBP/EUR, after the pair opened the week at the interbank level of 1.11 and spent most of the week trending nearer the level of 1.09.

After a brief recovery attempt in the middle of the week was proven short-lived, GBP/EUR closed the week near the interbank level of 1.09.

This week so far, GBP/EUR has already tumbled even lower, and at the time of writing this morning was trending close to a low of 1.08. This was the worst level for the pair since September 2017.

Rising no-deal Brexit fears continued to dominate the Pound (GBP) outlook, while the Euro (EUR) was supported by weakness in its rival the US Dollar (USD).

Pound (GBP) Exchange Rates Continues to be hit by Brexit-Associated Uncertainties

Even after Pound’s (GBP) sharp fall last week, the British currency’s recovery attempt was short-lived and it has been falling even lower today.

Following indication that UK Prime Minister Boris Johnson was willing to take Britain towards a worst-case scenario no-deal Brexit, the Pound is being hit by further signs that such an outcome is possible.

A thinning Parliament majority for the ruling Conservative Party is perceived as making the success of any Brexit plans even less likely.

This is being seen as bolstering the potential of a general election, as well as possible collaboration between the Conservative Party and the populist Brexit Party.

On top of this, there are deepening concerns about the stability of Britain in general after a fresh poll showed that Scottish voters are now more willing to vote for independence from the UK.

As a result of Brexit and political fears dominating the outlook, this morning’s stronger than predicted UK services PMI was not enough to bolster Sterling demand.

Euro (EUR) Exchange Rates Gaining on Rival Weakness despite Eurozone Concerns

Due to the Pound’s (GBP) weakness on Brexit, as well as the US Dollar’s (USD) latest weakness on global trade jitters, the Euro (EUR) has been climbing today despite a lack of domestic support.

The US Dollar (USD) and Euro often see a negative correlation. With the US Dollar falling against other safe haven currencies in response to the latest US-China trade war fears, the Euro has been climbing.

This has helped the Euro to put in strong gains against a weak Pound this morning, even as major Eurozone data continues to indicate weakness in the bloc’s economic outlook.

The Eurozone’s final July services and composite PMI stats were published today, and indicated that broad weakness in the bloc’s manufacturing sector was having a negative impact on services as well. German services came in at 54.5 rather than the expected 55.4.

Eurozone investor morale was also at its worst levels since 2014, according to this morning’s survey from Sentix.

Pound to Euro (GBP/EUR) Exchange Rate Losses to be limited by German Manufacturing News

The Pound to Euro (GBP/EUR) exchange rate is trending near its worst levels since 2017 on no-deal Brexit fears, but the pair’s potential for further losses may be limited if investors are hesitant to keep buying the Euro (EUR).

The Euro is gaining on rival weakness, but the Eurozone’s own economic outlook is becoming more concerning as well according to recent Eurozone data.

Concerns that the poor performance in Germany’s factory sector will keep negatively effecting the Eurozone economic outlook will likely come back into focus in the coming sessions.

Tomorrow will see the publication of Germany’s factory orders data from June, followed by industrial production on Wednesday, and trade balance on Friday.

If these stats continue to disappoint, the Euro could weaken enough for GBP/EUR to recover.

Still, the Pound’s (GBP) own potential for gains is limited. Unless there are some surprising optimistic Brexit developments, investors will have little reason to buy the Pound.

Overall, the Pound to Euro (GBP/EUR) exchange rate will be driven by strength in Euro rivals, Brexit developments, and upcoming German data.

Josh Jeffery

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