Pound Euro (GBP/EUR) Exchange Rate Benefits as Supreme Court Strikes Down Parliamentary Prorogation

Pound Sterling Euro (GBP/EUR) Exchange Rate Recovers Ground as Supreme Court Delivers Verdict

As the supreme court ruled that the prorogation of parliament was ‘unlawful, void and of no effect’ the Pound Sterling to Euro (GBP/EUR) exchange rate returned to a positive footing.

With markets now expecting to see parliamentary business resume some of the anxiety over Brexit eased, to the benefit of Pound Sterling (GBP).

The restoration of parliament would allow for greater scrutiny over the government’s Brexit plans and is likely to raise the odds of the UK potentially agreeing a deal ahead of the October deadline.

Even so, the ruling creates the potential for further political upheaval thanks to the fresh doubt cast over the viability of Boris Johnson’s position as prime minister.

As the political fallout continues the GBP/EUR exchange rate looks vulnerable to an increased degree of volatility.

Surprise IFO Business Expectations Fall Drags on Euro Demand

Although the German IFO business climate index bettered expectations in September this failed to offer the Euro (EUR) any particular rallying point.

Focus instead fell on a surprise decline in the accompanying business expectations gauge, which weakened from 91.3 to 90.8.

This deterioration suggests that the outlook for the Eurozone’s powerhouse economy remained weak at the end of the third quarter, fuelling speculation over a possible recession.

Following on the heels of Monday’s disappointing German manufacturing PMI this disappointing reading left investors with little incentive to favour the single currency over its rivals.

With markets bracing for the impact of fresh commentary from European Central Bank (ECB) policymakers EUR exchange rates are expected to remain on the back foot in the days ahead.

Signs of Retail Sector Softening Set to Weigh on GBP Exchange Rates

Support for the Pound could easily falter on the back of September’s CBI distributive trades index if the survey points towards a weak level of consumer demand.

Evidence that retail spending remained firmly in decline in the final month of the third quarter may drag GBP exchange rates lower across the board.

As resilient levels of consumer spending have helped to shore up economic activity in recent quarters, in spite of a manufacturing sector slowdown, a weak showing here could weigh heavily on the Pound.

On the other hand, if the index shows a solid improvement on the previous month’s dismal -49 this may encourage the GBP/EUR exchange rate to maintain a bullish trend.

Euro at Risk of Further Decline on Evidence of ECB Dovishness

If ECB speakers maintain a relatively dovish stance over the coming week this could see the Euro fall further out of favour.

With markets already bracing for the potential of further monetary loosening to come any fresh signs of dovishness may weigh heavily on EUR exchange rates.

However, the single currency could find a boost on the back of Thursday’s German GfK consumer confidence index.

Signs that sentiment among German consumers held steady may encourage hopes of future economic resilience, dimming the impact of the recent underwhelming manufacturing data.

As long as investors see reason to bet on the German economy avoiding a technical recession the strength of the GBP/EUR exchange rate could prove limited.

Louisa Heath

Contact Louisa Heath