Brexit Deadline Extension Offer Fails to Boost Pound Euro (GBP/EUR) Exchange Rate
Confirmation that EU leaders have agreed to extend the Brexit deadline until the end of January failed to give the Pound Sterling to Euro (GBP/EUR) exchange rate any particular boost.
As markets had widely anticipated this decision the ultimate impact on Pound Sterling (GBP) proved limited, with the odds of a no-deal scenario having already fallen sharply.
GBP exchange rates instead remained under pressure thanks to mounting anticipation for the latest parliamentary vote on Boris Johnson’s proposed general election.
While Labour is expected to block the motion the risk of fresh political turmoil was still enough to keep the GBP/EUR exchange rate lacking in momentum this morning.
Euro Benefits from German Import Price Uptick
The mood towards the Euro (EUR), meanwhile, saw some improvement on the back of September’s German import price index figures.
Although prices saw another sharp contraction on the year this was balanced out by a better-than-expected monthly uptick of 0.6%.
This suggests that inflationary pressure within the Eurozone’s powerhouse economy could be starting to pick back up heading into the fourth quarter.
While any improvement in the import price index is unlikely to feed through into the consumer price index immediately this still offered a positive signal for the inflation outlook, boosting the single currency.
Weaker Headline German Inflation Forecast to Dent Euro
Fresh commentary from Bundesbank officials could see EUR exchange rates stumble on Tuesday, however, if they signal concern over the economic outlook.
With Germany appearing on track to enter a technical recession any additional signs of cautiousness could put a dampener on the Euro.
As October’s German consumer price index reading is expected to show an easing from 1.2% to 1.0% on the year this is likely to fuel fresh selling pressure.
Any weakness in the third quarter French gross domestic product may also drag EUR exchange rates down as concerns over the strength of the wider Eurozone outlook continue to mount.
GBP/EUR Exchange Rate Remains Vulnerable to Brexit Disruption
Political developments look set to dominate the direction of the GBP/EUR exchange rate in the days ahead, however.
If Boris Johnson can push his hoped-for election through parliament the Pound is likely to fall further out of favour, given the likelihood of increased domestic uncertainty.
On the other hand, if the motion fails this could also put pressure on GBP exchange rates thanks to a continued lack of parliamentary consensus on Brexit.
As long as the risk of a no-deal scenario diminishes, though, the Pound could still gain some traction against its rivals in the near future.
However, as a prolonged sense of Brexit anxiety has already shown signs of dragging on UK growth the potential for GBP/EUR exchange rate gains may prove limited either way.