Pound Sterling to Euro (GBP/EUR) Exchange Rate 5-Day Outlook: German Recession Speculation Expected

Pound to Euro Exchange Rate Slumps to Nearer Opening Levels amid Brexit Uncertainty

Despite German recession fears causing the Euro’s (EUR) own broad weakness last week, the Pound Sterling to Euro (GBP/EUR) exchange rate ultimately shed its gain attempts as Brexit uncertainties worsened again.

GBP/EUR spent most of last week fluctuating within the interbank region of 1.12 after opening the week at that level.

The pair briefly touched interbank levels of 1.11 and 1.13, but didn’t trend too far below the week’s opening levels before markets closed for the week.

Both the Pound (GBP) and the Euro (EUR) ended the week on a bearish note, Sterling weighed down by Brexit jitters and the Euro’s appeal limited by persisting German recession fears.

Pound to Euro Exchange Rate Dragged by Brexit Uncertainties despite Euro Weakness

At the beginning of last week, the Pound to Euro (GBP/EUR) exchange rate saw a brief jump in demand amid speculation that the UK government’s new Brexit proposals could lead to a softer Brexit deal being agreed.

However, as details of Prime Minister Boris Johnson’s Brexit plans trickled out, many EU officials indicated that they were unacceptable despite some cautious optimism from UK Parliament.

This caused the Pound (GBP) to see weaker demand towards the end of the week, as uncertainty rose over whether the government would be forced to extend the Brexit process or would somehow find a way to force a no-deal Brexit.

Sterling’s late-week weakness made it easier for the Euro (EUR) to gain against it, despite a lack of solid support for the shared currency.

Investors bought the Euro due largely to weakness in its rivals, like the Pound’s weakness on Brexit jitters, and the US Dollar’s (USD) mixed performance on Federal Reserve interest rate cut bets.

Most of last week’s US data fell short of forecasts, and while Friday’s US data was better than forecast in some prints the Euro ultimately benefitted a lot from US Dollar (USD) losses last week.

Pound Exchange Rate Outlook: Investors Looking for Signs on Whether or Not Brexit will Be Delayed

Britain’s economic calendar will be relatively quiet early next week, save for some labour productivity data and a speech from Bank of England (BoE) Governor Mark Carney on Tuesday.

Thursday’s session, on the other hand, will see the publication of a slew of notable UK ecostats, including trade balance, growth, and production stats from August.

Unless these are highly surprising for Britain’s economic outlook though, they may be once again overshadowed by UK politics and Brexit.

With Prime Minister Boris Johnson now coming under fresh pressure to make clear what he will do if he cannot achieve a UK-EU Brexit deal in the coming weeks, no-deal Brexit fears are likely to persist.

If Johnson continues to indicate that he could find a way to avoid delaying Brexit, no-deal Brexit fears will worsen, and Sterling (GBP) may be in for deeper weakness in the coming week.

Euro Exchange Rate Outlook: German Data in Focus for Recession Speculation

The Euro (EUR) avoided major losses against the Pound (GBP) last week due to weakness in the shared currency’s rivals, but the currency remains unappealing overall.

Recent German and Eurozone data continues to indicate that the bloc’s economy is still suffering from a slowdown, and is being dragged lower by Germany’s steeply contracting factory sector.

As a result, the Euro could weaken further if upcoming German data disappoints investors.

Monday will see the publication of German factory orders, with industrial production following on Tuesday, trade balance stats on Thursday, and inflation stats on Friday.

These, as well as any surprising US ecostats or shifts in global central bank speculation, will be the main focus for Euro investors and could drive the Pound to Euro (GBP/EUR) exchange rate next week.

Josh Jeffery

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