Pound to Euro (GBP/EUR) Exchange Rate Falls on ‘Eye-Watering’ UK Brexit Withdrawal Agreement Backtrack

GBP/EUR Exchange Rate Sinks as UK Markets Brace for No-Deal Brexit

The Pound to Euro (GBP/EUR) exchange rate dipped this morning, with the pairing currently trading around €1.099.

Sterling has continued to struggle after Downing Street’s backtracking on the Brexit Withdrawal Agreement. The move has been called ‘really eye-watering’ by Catherine Barnard, a professor of European law at Cambridge University.

Mrs Barnard commented:

‘This is a remarkable piece of legislation and it expressly contravenes our international legal obligations to a point that the legislation itself says this is the intention, as did Brandon Lewis [the Northern Ireland secretary] yesterday.’

Yesterday also saw Ursula von der Leyen, the President of the European Commission, say that British Prime Minister Boris Johnson had undermined the EU’s trust in the UK.

Consequently, the Pound (GBP) has struggled on the growing possibility of a no-deal Brexit on December 31st.

Meanwhile, GBP investors are becoming increasingly concerned for Britain’s economy, with the new ‘rule of six’ restriction due to kick in from Monday. As a result, the nation’s economy – particularly pubs and restaurants – will suffer from the limit on public gatherings.

UK Chief Medical Advisor Chris Witty said that ‘between now and spring is going to be difficult’.

Euro (EUR) Edges Higher as European Markets Await ECB Interest Rate Decision

The Euro (EUR) edged higher against the Pound (GBP) today as European markets brace for today’s interest rate decision from the European Central Bank (ECB).

The ECB is forecast to hold its interest rates at 0%. However, any dovishness in the Monetary Policy Statement could drag down the single currency.

Analysts at Reuters commented:

‘The European Central Bank is all but certain to keep policy unchanged on Thursday but with the economic recovery losing momentum and a strong euro dampening already-anaemic inflation expectations, it may set the stage for more stimulus later.’

Today will also see the ECB’s President, Christine Lagarde, give a speech. Again, any downbeat forecasts for the Eurozone’s economy in the months ahead would prove EUR-negative.

The financial services company, UniCredit, said in its note:

‘Ms. Lagarde will need to walk a tightrope, probably hinting that the ECB is monitoring the implications of euro appreciation for price stability, and that all tools can be adjusted as needed to meet the inflation mandate.’

GBP/EUR Forecast: Could Brexit Jitters Continue to Drag Down Sterling into the Weekend?

Pound (GBP) traders will be looking ahead to tomorrow’s release of July’s UK Manufacturing and Industrial Production data. Any improvement in either sector would prove GBP-positive.

In Eurozone economic news, tomorrow’s release of the final German year-on-year inflation report for August will be in the spotlight. However, if this continues to shrink we could see the EUR/GBP exchange rate begin to falter.

Tomorrow will also see a speech by the ECB’s Philip Richard. As a result, any dovishness on behalf of the European Central Bank would prove EUR-negative.

The GBP/EUR exchange rate will likely remain subdued over the course of the week and into the weekend. With Brexit uncertainties continuing to rise, markets are going to remain weary around Sterling.

David Moore

Contact David Moore