GBP/EUR Exchange Rate Dented by Brexit Jitters
The Pound to Euro (GBP/EUR) exchange rate is trading lower this morning as heightened Brexit uncertainty stifles Sterling sentiment.
At the time of writing the GBP/EUR exchange rate is trading at around €1.0910, down roughly 0.3% from this morning’s opening levels.
Pound (GBP) Slides as Boris Johnson Repeats Call to Scrap the Irish Backstop
The Pound (GBP) is struggling to find support this morning in response to Boris Johnson’s calls for the EU to drop the Irish backstop from Brexit negotiations.
Johnson has repeatedly called for EU to compromise in talks by dropping the controversial backstop agreement, warning that a failure to do so will lead to the UK leaving the EU on October 31st without a deal.
“We are ready to work with our friends and partners to get a deal. But if you want a good deal for the UK, you must simultaneously get ready to come out without one.” – PM @BorisJohnson pic.twitter.com/njkoKb9lLI
— UK Prime Minister (@10DowningStreet) August 20, 2019
The PM has suggested the backstop could be replaced by a commitment to prevent a hard border in Ireland through the use of technology, however the EU has so far being resistant to this plan.
The renewed focus on Brexit has done no favours to Sterling this morning, with Johnson’s hardline stance against the EU seen as greatly increasing the risks of a no-deal Brexit.
Euro (EUR) Gains Trimmed, Italian Politics Centre Stage Today
At the same time, the (EUR) if facing headwinds in broader trade this morning as a result of the Italy’s current political turmoil.
Italian Prime Minister, Giuseppe Conte is expected to face a vote of no-confidence this afternoon, after far-right Interior Minister Matteo Salvini called time on his party’s fragile coalition with the Five Star Movement (M5S).
Salvini is hoping to trigger early elections in order to capitalise on current momentum his anti-immigrant League party enjoys in polls to form a new government with his right-wing allies.
However, there is a chance Salvini’s plan could backfire if opposition parties are able to form a new coalition.
Analysts at Danske Bank suggest:
‘Should Conte fail the vote, the initiative reverts to President Mattarella, who could either call for snap elections or try to broker a new cross-party alliance between Five Star and Renzi’s PD to avoid interference with the 2020 budgeting season.
‘Either way, political uncertainty in Italy will remain elevated for the time being.’
GBP/EUR Exchange Rate Forecast: Eurozone PMIs to Undermine the Euro?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate could bounce back later this week with the publication of the Eurozone’s latest PMI figures.
Market consensus suggests the data will reveal growth in the bloc’s private sector continued to slow last month, particularly in the manufacturing sector, which is expected to record its seventh consecutive month of contraction in August.
Such a gloomy reading could result in a sharp drop in the Euro on Thursday as it further highlights the need for the European Central Bank (ECB) to introduce some substantial stimulus next month.
In the absence of any notable economic data, UK politics are likely to remain a key catalyst for movement in Sterling this week.
This could see the Pound maintain its downside bias unless we see efforts to block a no-deal Brexit start to find some more momentum.