GBP/EUR Collapses to Six-Month Low as Brexit Talks in Jeopardy

The Pound to Euro (GBP/EUR) exchange rate fell off a cliff last week, plunging roughly 4 cents as the risks of a no-deal Brexit rose sharply.

Last Week: Pound Nosedives as Brexit Talks in Crisis

The Pound was met by a startling sell-off last week, plummeting to its worst levels since the height of the coronavirus crisis amid flaring Brexit tensions between the UK and EU.

This was centred on Boris Johnson’s controversial internal market bill, which seeks to override parts of the EU withdrawal agreement and would see the UK ‘break international law’.

The move was condemned by the EU, which presented the UK with an ultimatum to drop the bill, or risk jeopardising a trade deal, the threat of which drove the GBP sell-off.

The euro, meanwhile, was supported last week by the European Central Bank’s (ECB), latest policy decision.

While the ECB keep rates on hold this month, investors welcomed the ECB’s improved growth forecasts as well as President Christine Lagarde’s dismal of concerns about the strength of EUR exchange rates.

Three Things to Watch out for This Week

1. Brexit Headlines

Expect to see Brexit developments remain the key catalyst of movement in the Pound this week, likely leaving Sterling vulnerable to further losses if Johnson is able to push his internal market bill through parliament unamended.

2. BoE Rate Decision

Also influencing GBP exchange rates will be the Bank of England’s (BoE) latest rate decision. No policy changes are expected this week but GBP investors will remain vigilant for any mention of negative interest rates.

3. German ZEW Survey

The most notable EUR data release this week will be the latest ZEW economic surveys. With September’s release potential posing some challenges for the Euro if sentiment in Germany is shown to have weakened.

GBP/EUR Outlook

The GBP/EUR exchange rate remains vulnerable to more selling this week as Brexit remains firmly in the spotlight, and is likely to overshadow a number of high impact GBP data releases.

Matthew Andrews

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