GBP/EUR Exchange Rate Recovers Ground Ahead of Supreme Court Ruling
UPDATE: The Pound Sterling to Euro (GBP/EUR) exchange rate remained on a weak footing this afternoon as investors continued to focus on the supreme court hearing.
Demand for Pound Sterling (GBP) picked up over the course of Tuesday as markets speculated over the likely outcome of the appeal hearing.
Bets that the judges may rule the prorogation of parliament unlawful, potentially giving MPs more time to push for an agreeable deal, helped to shore up GBP exchange rates.
Improving Eurozone Economic Sentiment Dents Pound Sterling Euro (GBP/EUR) Exchange Rate
A better-than-expected improvement in September’s ZEW economic sentiment indexes left the Pound Sterling to Euro (GBP/EUR) exchange rate under pressure.
Although sentiment remained in negative territory investors still took encouragement from the sharp improvement seen on the month, with the German index jumping from -44.1 to -22.5.
This suggests that some of the anxiety within the Eurozone’s powerhouse economy has eased, even though businesses maintained a cautious outlook heading into the fourth quarter.
While the current conditions index proved less encouraging in nature, showing a significant decline on the month, this failed to weigh on the Euro (EUR) at this stage.
Lack of Brexit Deal Progress Weighs Heavily on GBP/EUR Exchange Rate
Confidence in Pound Sterling (GBP), meanwhile, remained generally limited thanks to increasing market anxiety over Brexit.
As Boris Johnson’s talks with European Commission President Jean-Claude Juncker failed to yield any positive signs of progress the prospect of a no-deal scenario continues to hang over the UK economy.
GBP exchange rates also weakened in anticipation of the supreme court judgement on the prorogation of parliament.
If the judges rule that the move was ultimately unlawful this may force Johnson to recall parliament, something which may give the Pound a strong boost against its rivals as the risk of a no-deal Brexit eases.
ECB Reticence to Offer Euro Exchange Rate Rallying Point
Fresh commentary from European Central Bank (ECB) policymakers could see EUR exchange rates stumble in the days ahead.
With markets looking for signs that the ECB is likely to deliver further monetary loosening before the end of the year any dovish signals could weigh heavily on the single currency.
On the other hand, if policymakers indicate dissatisfaction with the central bank’s current dovish bias the Euro may find a fresh rallying point.
As long as markets see lower odds of the ECB enacting further loosening this year the GBP/EUR exchange rate looks vulnerable to additional selling pressure.
Even so, if evidence continued to point towards a weakening of Eurozone inflationary pressure the potential for Euro gains could still prove limited.
Fresh Pound Losses Forecast on Any Signs of BoE Dovishness
Support for GBP exchange rates may prove limited as markets brace ahead of Thursday’s Bank of England (BoE) policy announcement.
Although no change in monetary policy is expected at this stage investors remain keen to gauge the current outlook of policymakers.
Any indication that the BoE is taking a more cautious view in the face of ongoing Brexit-based uncertainty could leave the GBP/EUR exchange rate exposed to a fresh downtrend.
However, if policymakers appear content to keep interest rates at their current level for longer the mood towards the Pound is likely to see an improvement.
Fresh political developments could ultimately eclipse the impact of the BoE meeting, though, as speculation over the possibility of a Brexit deal continues.