Pound to Euro (GBP/EUR) Exchange Rate Edges Higher Despite Passing of Brexit Internal Market Bill

GBP/EUR Exchange Rate Rises as Brexit Internal Market Bill Passes by 77 Votes

The Pound to Euro (GBP/EUR) exchange rate edged higher by 0.2% this morning. The pairing is currently fluctuating around €1.084.

Last night saw the UK Brexit Internal Market Bill pass by a comfortable 77 votes, by 340 votes against 263. As a result, Sterling traders have become more concerned that the UK could now be fast heading for a hard Brexit on December 31st this year.

Former Prime Minister David Cameron criticised the Bill, saying on Monday:

‘Passing an act of parliament and then going on to break an international treaty obligation is the very, very last thing you should contemplate. It should be an absolute final resort. So, I do have misgivings about what’s being proposed.’

In UK economic news, today saw the release of the latest ILO Unemployment Rate for July. The figure confirmed consensus and rose from 3.9% to 4.1%.

The Office for National Statistics (ONS) commented:

‘Redundancies increased by 58,000 on the year, and 48,000 on the quarter, to 156,000.

‘These are the largest annual and quarterly increases seen since 2009. While redundancies are at their highest level since September to November 2012, the level remains well below that seen during the 2008 downturn.’

As a result, GBP investors are now more worried about the British economy than ever before.

Not only is the nation facing a financial setback from the coronavirus pandemic, but a hard Brexit continues to linger in the background. Consequently, this has dampened market sentiment in Sterling.

Euro (EUR) Sinks as Demand for Safe-Haven Currencies Dip on Strong Chinese Economic Recovery

The Euro (EUR) failed to gain against Sterling today despite signs that the Eurozone’s industrial production is on the road to recovery.

However, demand for safe-haven currencies has slipped as China – the world’s second-largest economy – continues to show a broad recovery from the coronavirus pandemic.

China’s industrial production grew by 5.6% in August, sparking risk-on market mood and a broad appetite for riskier assets.

Nevertheless, EUR has benefited from its positive-correlation with the US Dollar (USD) today. The ‘Greenback’ has suffered more from a sell-off of safe-haven assets, and if this continues, we could see the single currency rise.

In Eurozone economic news, today will see the release of the latest Eurozone ZEW Survey of Economic Sentiment for September. If this confirms consensus and dips to 62.8, then we would see the single currency suffer.

GBP/EUR Forecast: Could Souring UK-EU Relations Drag Down Sterling?

Pound (GBP) traders will be looking ahead to tomorrow’s release of the UK Consumer Price Index for August. If this falls to 0% year-on-year, then we could see Sterling suffer on growing anxiety over Britain’s economic recovery.

Euro (EUR) investors will be keeping a close eye on tomorrow’s Eurozone Trade Balance report for July. If exports continue to suffer, then we the EUR/GBP exchange rate could continue to sink.

The GBP/EUR exchange rate will continue to be influenced by the ongoing Brexit developments. As a result, Sterling could fall if UK-EU relations continue to suffer from the passing of the Brexit Internal Market Bill.

David Moore

Contact David Moore