GBP/EUR Exchange Rate Dips on UK-EU Negotiation Breakdown Fears
The Pound Euro (GBP/EUR) exchange rate eased this morning, with the pairing currently trading around €1.121 after French President Emmanuel Macron told British Prime Minister Boris Johnson he has until the end of the week to revise his Brexit proposal.
Sterling declined as markets identified the heightened risk of a breakdown in UK-EU negotiations. The British premier has repeatedly stated that last week’s proposal was his ‘final’ offer and the only alternative is a no deal outcome.
Krišjānis Kariņš, Latvia’s Prime Minister, commented:
‘If the offer from the UK turns out to be a take-it-or-leave-it, it’s going to be very difficult I see in agreeing. It’s fully dependent on the will of Mr Johnson because from the European side, we’re always open and looking towards a deal.’
Doubling down on the apparent contradiction inherent in requesting an EU extension while still planning to leave on October 31, a Downing Street spokesperson said:
‘If EU leaders are betting that [the Benn act] will prevent no deal, that would be a historic misunderstanding.’
In terms of UK ecostat news, today’s Halifax house prices for September eased on the month from 0.2% to -0.4%, showing their slowest rate of growth in 6 years.
EUR/GBP Exchange Rate Improves despite August’s Sinking German Factory Orders
The Euro (EUR) edged higher against the Pound despite this morning’s German factory orders for August easing by -0.6%. While the figures had a limited effect on the Euro they still fed into fears for a recession in the Union’s powerhouse economy.
Oliver Rakau, Chief German Economist at Oxford Economics, was upbeat in his assessment:
‘Overall, the details of the German August factory orders look better than the weak headline would suggest and in my view point to a bottoming in the industrial cycle. But Brexit and tariffs mean that any recovery will be fragile… Car sector orders also continue to outpace weak production… No fast bounce, but a moderate turnaround looks likely.’
With no other eco-stats due today, the Euro could sink back against the Pound on concerns over an emerging US-EU trade dispute which would negatively impact an already fragile Eurozone economy.
Pound Euro (GBP/EUR) Exchange Rate Outlook: Could Sterling Rise on a Possible Brexit Extension?
A Tokyo summit speech by Governor of the Bank of England (BoE), Mark Carney will draw the spotlight for GBP investors tomorrow. Any dovish comments about the British economy could see the Pound to Euro (GBP/EUR) exchange rate sink.
Tomorrow will also see the release of September’s UK BRC like-for-like retail sales, which are expected to flatline at 0%.
Meanwhile, the publication of August’s German industrial production figure will grab Euro investor focus tomorrow. This is expected to ease by -0.3% and could offer Sterling an opportunity to regain ground on the single currency.
Brexit will remain in the driving seat for the GBP/EUR exchange rate this week and could see Sterling rise if a compromise can be reached between the UK and EU.