Currency News and Forecast: GBP/EUR Exchange Rate in Free Fall as EU Threatens Legal Action, Pound to US Dollar Hits Six-Week Low

Pound (GBP) Exchange Rates Plummet as EU Takes Hardline Stance on Internal Market Bill

Pound (GBP) exchange rates nosedived during yesterday’s trading session, leaving the GBP/EUR exchange rate at a six-month low and Pound to US Dollar struggling at $1.27 this morning.

The EU threatened to take legal action in response to the UK government’s plans to override the withdrawal agreement with its internal markets bill.

Following emergency talks between the two sides, the EU warned that the ‘UK has seriously damaged trust between the EU and the UK’, something which looks to make a post-Brexit trade deal extremely unlikely.

The pound briefly found some respite this morning after July’s monthly GDP releases reported the UK economy got off to a healthy start in the third quarter.

However, GBP exchange rate remain under pressure this morning, with GBP/EUR briefly dropping as low as €1.07 as the UK rejects the EU’s ultimatum, leaving trade talks hanging in the balance.

Euro (EUR) Skyrockets Following ECB Meeting

The Euro (EUR) was catapulted higher on Thursday in the wake of the European Central Bank’s (ECB) September policy meeting. The Euro to Pound exchange rate appreciated well over 1%

As expected, the ECB opted to leave its monetary policy untouched this month, while EUR investors cheered the bank’s upwardly revised growth forecasts for 2020.

Propelling the single currency even higher were comments from ECB President Christine Lagarde in which she largely dismissed concerns that EUR exchange rates have strengthened too sharply.

Euro exchange rates are still strong this morning despite Europe’s deteriorating coronavirus situation continues to worry EUR investors.

The Euro to Pound exchange rate is pushing higher at £0.92, while the Euro to US Dollar is strengthening at $1.18.


US Dollar (USD) Fluctuates on Shifting Market Sentiment, Pound to US Dollar Slips

The US Dollar (USD) was on the back foot yesterday as a more upbeat market mood following the ECB’s rate decision saw demand for the safe-haven ‘Greenback’ plunge initially.

However, market sentiment quickly soured again as the failure of US lawmakers to reach an agreement on stimulus sparked another slump in equities markets.

USD/GBP continued strengthening, however, as the Pound to US Dollar exchange rate continued to drop on the EU’s ultimatum over the Internal Markets Bill’s impact on the Brexit Withdrawal Agreement.

Turning to today’s session, the spotlight will likely be on the latest US CPI release. Will an uptick in domestic inflation last month help to buoy the US Dollar later this afternoon?


Canadian Dollar (CAD) Undermined by Weaker Oil Prices

The Canadian Dollar (CAD) edged lower on Thursday, with investors shying away from the commodity-linked currency as a surprise build up in US oil inventories sent crude prices lower.


Australian Dollar (AUD) Sidelined by Risk-Off Trade

The Australian Dollar (AUD) was left on the back foot overnight on Thursday, with investors shying away from the risk-sensitive currency as Brexit jitters, coronavirus uncertainty and US-China tensions all weighed on market sentiment.


New Zealand Dollar (NZD) Slips on Weak PMI Figures

The New Zealand Dollar (NZD) also trended lower overnight, with NZD investors disappointed to see domestic manufacturing activity grind to a halt last month as New Zealand reimposed coronavirus restrictions.

However, the NZD/GBP is making gains as the Pound continues to suffer from UK-EU Brexit Withdrawal Agreement tensions.

Matthew Andrews

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