Fortnight Worst as Pound to Euro (GBP/EUR) Exchange Rates Extends Losses on No-Deal Brexit Scare

Pound to Euro Exchange Rate Plunges as Markets Increasingly Concerned Over No-Deal Brexit

Despite a lack of strong strength in the Euro (EUR) this week, the Pound Sterling to Euro (GBP/EUR) exchange rate has been tumbling since yesterday. The Pound (GBP) has been sold across the board as markets digest fresh no-deal Brexit risks.

Last week’s GBP/EUR movement was mixed as both currencies weakened. The Euro was knocked by a US Dollar (USD) recovery rally, but GBP/EUR was still unable to hold the week’s best levels since May.

Ultimately opening and closing the week around the interbank level of 1.12, GBP/EUR has seen more solid direction so far this week.

GBP/EUR has been trending with a downside bias since markets opened, slumping both yesterday and this morning. At the time of writing on Tuesday, GBP/EUR is trending around a low of 1.10. This is the worst level for the pair in a fortnight, since late-August.

Sterling may have even further to fall as well, with hard-Brexit fears returning to the focus of investors.

Pound (GBP) Exchange Rate Losses Accelerate as Brexit Uncertainties Return to Focus

Investors have been selling the Pound (GBP) since markets opened this week. It comes as markets react to reports that the UK government will alter parts of the Brexit withdrawal agreement related to Northern Ireland.

The move has been perceived as a threat to the EU over UK-EU negotiation deadlocks. However, analysts have expressed concern that the move may only make a no-deal Brexit even more likely.

Following yesterday’s Pound tumble, the British currency is even weaker today. Signs of fissures in the government have further weighed on Sterling.

Nigel Green, CEO at deVere Group, said:

‘The brinkmanship between the UK and EU has been ratcheted up as the negotiators meet in London for the eighth and penultimate round of talks.’

Euro (EUR) Exchange Rates Find Support in German Export Stats

The Euro (EUR) found it slightly easier to sustain a rebound against the Pound (GBP) today, as the latest Eurozone data supported the shared currency.

Germany’s July trade balance report came in stronger than expected, showing that exports continued to rise at a strong rate despite the coronavirus pandemic.

Analysts speculated that the strong exports data lends itself to the potential of Germany seeing a v-shaped recovery. According to Carsten Brzeski at ING:

‘Next to hotels, restaurants and culture, which are still suffering from the effects of social distancing, the export sector is probably the most exposed to the crisis, suffering from the domestic lockdown measures as much as from lockdowns across the world and supply chain disruptions.’

It follows last week’s weaker performance for the Euro, when the shared currency was hit lower by a rebound in its rival the US Dollar (USD).

Pound to Euro (GBP/EUR) Exchange Rate Awaits European Central Bank

Investors are hesitant to buy the Euro (EUR) too much, as markets await Thursday’s highly anticipated European Central Bank (ECB) policy decision.

The ECB is not expected to make any changes to Eurozone interest rates, but any shift in tone regarding the coronavirus pandemic or policy plans could be highly influential.

Analysts are expecting the ECB to ramp up concerns about the Euro’s broad strength in recent months. If the ECB attempts to talk down the Euro, this could lead to further Euro losses.

On the other hand though, the Pound may be in for further weakness as well, depending on how the Brexit situation develops.

If the UK government’s threats fail to lead to any progress in negotiations or cause relations to weaken further, the Pound is likely to weaken.

On the other hand, any fresh signs that a deal could still be made may help the Pound to Euro (GBP/EUR) exchange rate to recover some of this week’s losses.

Josh Jeffery

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