Pound Euro (GBP/EUR) Exchange Rate Seeks to Refresh Lows on Brexit Uncertainty

GBP/EUR Exchange Rate Dips on Mixed Brexit Outlook

The Pound to Euro (GBP/EUR) exchange rate is on the back foot this morning, as Brexit uncertainty continues to take its toll on Sterling.

At the time of writing the GBP/EUR exchange rate is trading at around €1.0968, down roughly 0.4% from this morning’s opening levels.

Pound (GBP) Slumps amidst Brexit Uncertainty

The Pound (GBP) is currently struggling to hold its ground against the Euro (EUR) amidst confusion over the UK government’s stance on Brexit trade talks with the EU.

Yesterday a report in the Daily Telegraph claimed that the UK is close to abandoning hopes for a comprehensive trade deal with the EU, as the two sides remain diametrically opposed on a number of key issues.

This report suggested that Ministers are already working under the assumption of a no-deal Brexit and any trade agreement would be limited in scope.

However, Downing Street later refuted these claims, with officials stating the current state of talks is neither a ‘breakthrough nor a breakdown’.

Boris Johnson’s spokesperson said:

‘Round five negotiations are ongoing and we remain committed to working hard to find the outlines of a balanced agreement … but significant differences still remain on a number of important issues.’

The current round of talks are scheduled to conclude later today, although GBP investors are not holding out much hope for any progress.

Euro (EUR) Supported by Sharp Improvement in German Consumer Sentiment

At the same time, the Euro (EUR) is edging higher this morning as EUR investors welcome Germany’s latest consumer confidence index.

According to data published by GfK, August’s consumer sentiment index leapt from –9.4 to –0.3, beating expectations for a more modest improvement to –5.

This was the highest reading since April and appeared to be attributed to a temporary VAT cut introduced as part of Germany’s stimulus efforts.

Rolf Bürkl, consumer expert at GfK

‘There is no doubt that the reduction in value-added tax has contributed to the extremely positive progress. It is clear that consumers are looking to make major purchases earlier than planned, which will help boost spending this year.’

EUR investors will be hoping this positive outlook will be reflected in consumer confidence figures for the entire Eurozone when they are published later this afternoon.

GBP/EUR Exchange Rate Forecast: Eurozone and UK PMIs in Focus

Looking ahead to the end of this week’s session, the main catalyst of movement in the Pound to Euro (GBP/EUR) exchange rate looks to be the latest PMI releases from both the UK and Eurozone.

July’s preliminary figures are likely to be supportive for their respective currencies, with both the UK’s and Eurozone’s private sectors forecast to have returned to growth, following four months of contraction.

However, investors will want to play close attention to the individual categories which make up each index to gauge whether this rebound is likely to be sustainable.

This could undermine Sterling in particular if the indexes point to significant jobs losses in the coming months.

Matthew Andrews

Contact Matthew Andrews