Pound to Euro Crashes to Six-Month Low on EU Brexit Demand and ECB Outlook

Pound Hits Six-Month Low against the Euro at €1.08, GBP/USD Falls to Lowest Level in Six Weeks: UPDATE 10/9/2020 17:15

The Pound to Euro exchange rate continued crashing through Thursday’s session, hitting a six-month low against EUR and plummeting against its peers.

Following a meeting in London between European Commission Vice-President Maroš Šefčovič and Michael Gove, the EU Commission released a statement demanding the UK drops its plan to breach international law and that the internal markets bill ‘seriously damaged trust’.

This sent GBP/EUR crashing while the Pound to US Dollar exchange rate also nosedived despite Initial Jobless Claims disappointing USD investors.

EUR exchange rates rocketed higher after the European Central Bank (ECB) policy meeting where they held interest rates and upgraded growth forecasts.

Additionally, ECB President Christine Lagarde eased deflation worries and played down strength of EUR exchange rates, pushing the Euro higher across the board. This strengthened the Euro to US Dollar exchange rate even further towards a two-year high.

 

GBP Dips as UK Pushes Forward with Bill to Override EU Withdrawal Deal, Pound to Euro Slips

The Pound to Euro exchange rate struck a fresh six-week low and GBP fell against the majority of its other peers yesterday. The UK government published its internal market bill, which proposes changes to the EU withdrawal agreement.

GBP investors were spooked as European Commission President Ursula von der Leyen raised concerns over the bill, warning it would ‘break international law and undermine trust’.

However, Sterling bounced back from its worst levels after the EU confirmed the bill would not cause it to break off Brexit trade talks. This allowed the Pound to Euro exchange rate to tick slightly higher towards the €1.10 mark.

Turning to today’s session, the upside potential in the Pound looks limited as Brexit remains firmly in focus and investors remain extremely pessimistic on the chances of this week’s trade talks delivering any meaningful progress.

 

EUR Firms on Hopes for ECB Optimism, Pushing Euro to US Dollar Back Towards Two-Year High

The Euro (EUR) trended higher on Wednesday, bolstered by reports the European Central Bank (ECB) will show more confidence in its economic forecasts.

The ECB will publish its new forecasts following the conclusion of its September policy meeting later this afternoon, and is expected to upwardly revise its 2020 GDP expectations.

This allowed EUR to gain against the Pound, and the Euro to US Dollar exchange rate to strengthen sharply, while improved sentiment also weighed on USD.

However, the Euro could still give some ground today, if the ECB also uses today’s policy statement as an opportunity to express its concerns over the current strength of EUR exchange rates.

Ahead of the ECB’s policy meeting, the Euro to US Dollar exchange rate is creeping up to $1.18 and the two-year highs of $1.20 of last week.

 

US Dollar (USD) Weakens in Upbeat Trade, EUR/USD Rises as Pound to US Dollar Steady

The US Dollar (USD) shed some of its recent gains on Wednesday as a USD selling bias re-emerged following a modest improvement in market sentiment.

The pullback in the US Dollar came in spite of a surprisingly large surge in the latest JOLTs job opening figures for July suggested the US jobs market was at its strongest since the start of the coronavirus crisis.

Coming up, the focus for USD investors today looks to be on the latest initial jobless claims, with the US Dollar potentially finding some support if claims continued to trend lower last week.

 

Canadian Dollar (CAD) Muted as BoC Keeps Rates on Hold

The Canadian Dollar (CAD) was mostly flat through yesterday’s trading session as the Bank of Canada’s (BoC) decision to leave its monetary policy untouched offset a rally in oil prices.

 

Australian Dollar (AUD) Buoyed by Risk-On Tone

The Australian Dollar (AUD) ticked higher overnight on Wednesday, with investors favouring the risk-sensitive ‘Aussie’ amidst an improvement in market sentiment and drop in the US Dollar (USD).

 

New Zealand Dollar (NZD) Undermined by Weak Card Spending

The New Zealand Dollar (NZD) relinquished some ground overnight on Wednesday, as a surprisingly sharp slump in domestic retail card spending highlighted the impact of New Zealand’s new lockdown measures.

Matthew Andrews

Contact Matthew Andrews


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