GBP/EUR Exchange Rate Sinks on BoE and Brexit Uncertainty
The Pound to Euro (GBP/EUR) exchange rate is under pressure this morning as Bank of England (BoE) rate speculation and no-deal Brexit fears both weigh on the pairing.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1811, down almost 0.3% from this morning’s opening levels.
Pound Struggles as Markets Remain Split on BoE
The Pound (GBP) is trending lower against the Euro (EUR) and the majority of its other peers this morning as markets remain wary of the UK currency ahead of Thursday’s rate decision from the BoE.
GBP investors are currently split on whether the BoE will cut interest rates this week, with CME group’s BoE Watch tool placing the odds of an immediate cut at 58%, a notable drop from the 72% priced in by markets at the start of last week.
Our cut-out-and-keep guide to Thursday's Bank of England meetinghttps://t.co/6B7yTU4jYO pic.twitter.com/UOETlSyoX2
— ING Economics (@ING_Economics) January 27, 2020
Whilst the odds for a rate cut may have eased in recent days, the almost 50-50 chance of a cut is unnerving some GBP investors, resulting in them shying away from Sterling this morning.
Sterling Sidelined by Brexit Fears
Further limiting the appeal of the Pound this morning are growing fears that the UK could face a no-deal Brexit at the end of 2020.
As the UK prepares to formally leave the EU at the end of the week, GBP investors are growing increasingly nervous about the next stage of negotiations.
This has been partly fueled by recent comments from the EU’s chief Brexit negotiator Michel Barnier.
Barnier said in a joint news conference with Irish Prime Minister Leo Varadkar on Monday:
‘This negotiation is not usual because at the end of this year, the UK is leaving the single market, it is it’s choice, it is leaving the customs union.
‘If we have no agreement, it will not be business as usual and the status quo, we have to face the risk of a cliff edge, in particular for trade.’
With the EU already looking to take a hard stance against the UK in negotiations, GBP investors are becoming increasingly sceptical that Boris Johnson will be able to negotiate a trade deal by the end of the year and prevent a no-deal Brexit.
GBP/EUR Exchange Rate Forecast: EUR investors to Focus on Eurozone GDP and Inflation
Looking ahead, also set to influence the Pound to Euro (GBP/EUR) exchange rate this week will be the publication of the Eurozone’s latest GDP figures on Friday.
Economists forecast the Eurozone economy will have continued to expand at the modest pace of 0.2% through the fourth quarter, but could a slight pick-up in growth lend some support to the Euro?
Accompanying the GDP figures will be the Eurozone’s consumer price index, where another acceleration of headline inflation this month could also prove supportive of the single currency.