Month Worst for Pound to Euro (GBP/EUR) Exchange Rate amid Full-Force Return of Brexit Fears

Pound to Euro Exchange Rate Continues Plummet on Rising Market Panic

A full-force return of no-deal Brexit fears has taken markets by shock this week, and the Pound Sterling to Euro (GBP/EUR) exchange rate is plummeting as a result. Despite the news coming in on Monday, Sterling (GBP) still tumbles as of Wednesday morning.

Last week’s movement was actually fairly steady, as GBP/EUR reacted to a rebound in the US Dollar (USD). However, since opening this week at the interbank level of 1.12, GBP/EUR has been plummeting.

GBP/EUR has already shed over two cents since markets opened on Monday. At the time of writing, GBP/EUR trends near a low of 1.0987. This is the worst level for the pair since late-July, over a month ago.

Analysts predict there may be yet more losses ahead for the Pound as Brexit fears return to markets. Euro (EUR) traders, on the other hand, await tomorrow’s European Central Bank (ECB) policy decision.

Pound (GBP) Exchange Rates Continue to Tumble as No-Deal Brexit Fears Dominate

Markets have been selling the Pound (GBP) en masse since Monday. No-deal Brexit fears have surged back to the forefront of Pound trade in reaction to reports that the UK government could rewrite its Brexit withdrawal deal as a negotiation threat.

The government’s top lawyer resigned in response to the government’s plan. The plan has also come under criticism from Conservative Party backbenchers, including ex-Prime Minister Theresa May.

Critics have also said that the re-legislated bill would break international law.

Fears that the threat will backfire and make a no-deal Brexit more likely have left Sterling in freefall this week. It follows months in which Pound investors focused more on coronavirus developments than on unmoving Brexit progress.

According to John Hardy, Currency Analyst at Saxo Bank:

‘Boris Johnson’s aggressive Brexit stance is making waves, with Sterling selling off steeply as the market begins to price in the risk that the UK is willing to end the Brexit transition period with No Deal rather than submit to EU terms on fisheries and especially state aid (UK internal investments favouring various industries).’

Euro (EUR) Exchange Rates Firm Ahead of European Central Bank (ECB)

The Euro (EUR) has been sliding since last week. Investors sold the shared currency from its best levels in profit-taking, as its rival the US Dollar (USD) saw a rebound from lows.

Investors have kept selling the Euro amid anxiety that the European Central Bank (ECB) will become more dovish. ECB officials have been warning over the Euro’s strength lately, which some analysts predict will be a key element of this week’s upcoming policy decision.

According to Jane Foley, Analyst at Rabobank:

‘When ECB Chief Economist Lane stated earlier this month that ‘the Euro-Dollar rate does matter’, he was delving further into the realms of FX intervention than many ECB officials have dared for years.’

Still, while the ECB is expected to be a little more dovish, the Euro’s losses are cooling today as markets await tomorrow’s ECB news.

Pound to Euro (GBP/EUR) Exchange Rate Awaits Brexit and ECB Developments

As analysts speculate, the Pound (GBP) may have even further to fall in the coming sessions. As the UK and EU meet for the penultimate round of Brexit negotiations, a lack of progress could lead to huge no-deal Brexit panic.

John Hardy at Saxo Bank said:

‘The pressure on the Pound could build further if talks this week fail to budge the EU’s position. Boris Johnson has set an October 15 deadline for striking an agreement.’

However, while there is potential for Brexit-inspired Pound losses, the Euro (EUR) could also be knocked depending on how tomorrow’s European Central Bank (ECB) policy decision unfolds.

The ECB is expected to ramp up warnings about the Euro’s strength. If the bank talks down the Euro more than expected, this could lead to a Euro slump. This would make it easier for GBP/EUR to avoid further losses.

Still, without optimistic Brexit developments, the Pound to Euro (GBP/EUR) exchange rate’s potential for more solid advances is likely to be limited.

Josh Jeffery

Contact Josh Jeffery