Does the Pound Euro Exchange Rate Have Further to Fall? Brexit Talks Look Dead in the Water

GBP/EUR Exchange Rate Trading Close to a One-Month Low as Brexit Talks Doomed

The Pound to Euro (GBP/EUR) exchange rate remains on the defensive this morning, amid growing speculation that Brexit negotiations will collapse this week.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1125, just shy of a one-month low.

Pound (GBP) Facing Further Losses as Breakdown in Brexit Talks Appears Inevitable

Having touched a one-month low on Tuesday, the Pound (GBP) looks to have further to fall as all signs point to Brexit talks collapsing this week.

This comes following a flurry of phone calls between Boris Johnson and EU leaders, in which it was reportedly made clear that the PM’s recent Brexit proposals could not form the basis for a deal.

A source within Downing Street is reported to have claimed that a deal is ‘essentially impossible, not just now but ever’, following a call with German Chancellor Angela Merkel.

This claim was met by fury from within the EU, with European council president, Donald Tusk accusing Johnson of playing a ‘stupid blame game’.

Despite this however, the EU is reportedly planning to offer to extend the Brexit deadline until June, as a delay now appears inevitable.

While a bill has been passed compelling Johnson to seek a Brexit delay if he is unable to reach a deal, there are fears that he will try and circumvent the law.

Because of this GBP investors aren’t quite ready to rule out an imminent no-deal Brexit just yet, the prospect of which may prompt another sell-off of the Pound when talks officially collapse.

Euro (EUR) Subdued on ECB De Guindos Comments

At the same time, the Euro (EUR) is muted this morning following comments from European Central Bank (ECB) Vice President Luis De Guindos.

De Guindos suggested that the bank still had headroom to ease monetary policy if the growth outlook continues to deteriorate.

DE Guindos also hinted this could include lowering interest rates further, but he would not be drawn on whether the bank could implement more policy changes at its next meeting.

GBP/EUR Exchange Rate Forecast: UK GDP Figures to Offer Momentary Distraction from Brexit?

Looking ahead to the second half of the week, the publication of the UK’s latest GDP figures could offer a brief distraction from Brexit.

However their release is unlikely to help reverse the recent downtrend in the Pound to Euro (GBP/EUR) exchange rate, with economists forecasting that domestic growth will have stagnated in August.

Also on the docket for GBP investors will be a speech by Bank of England Governor, Mark Carney. Will Carney echo recent comments from BoE policymaker Michael Saunders and suggest that rate could be cut even if a Brexit deal is reached?

Meanwhile, the publication of the minutes from the ECB’s most recent policy meeting could influence the Euro on Thursday.

EUR investors will look to the minutes to shed more light on the ECB’s plans for monetary policy, and whether there is much appetite for further easing within the bank.

Matthew Andrews

Contact Matthew Andrews