Rising Odds of No-Deal Brexit Weigh Heavily on Pound Euro (GBP/EUR) Exchange Rate
The Pound to Euro (GBP/EUR) exchange rate fell to its lowest level since mid-September as markets continued to brace for the prospect of a no-deal Brexit scenario.
Although UK-EU trade talks are still set to continue until Sunday the mood of investors became increasingly anxious about the possibility of no agreement coming to pass.
As Ursual von der Leyen reportedly told EU leaders that there is a ‘higher probability for no deal than deal’ this left Pound Sterling (GBP) on the back foot against its rivals.
With the UK economy already showing signs of slowing in the fourth quarter fears of a greater deterioration in 2021 weighed heavily on GBP exchange rates.
EUR Exchange Rates Shake off Negative German Inflation
Although November’s German consumer price index report confirmed that the headline inflation rate had dipped deeper into negative territory this failed to dent the Euro (EUR).
As the data merely confirmed the initial reading of 0.3% the impact of the data proved limited, especially in the wake of Thursday’s European Central Bank (ECB) policy announcement.
The single currency found some additional support on the back of October’s Italian industrial production figures, meanwhile.
As the monthly production rate saw a stronger pick up on the month than anticipated, rising 1.3% after September’s -5.1% contraction, the appeal of the Euro improved.
While doubts over the health of the wider Eurozone economic outlook remain this failed to put any particular dampener on EUR exchange rates ahead of the weekend.
Rising UK Unemployment Rate Forecast to Add to Pound Weakness
If a Brexit deal fails to materialise over the weekend the GBP/EUR exchange rate looks set to extend its downtrend further, having the potential to hit further multi-month lows.
The mood towards the Pound could sour further on Tuesday with the release of the latest set of UK labour market data, meanwhile.
Forecasts point towards a fresh increase in the unemployment rate for October, rising from 4.8% to 5.1% on the month.
Evidence of a deteriorating labour market may add to existing anxiety over the economic outlook, with further job losses appearing likely down the line thanks to the recent collapse of key high street names.
Weak Eurozone Industrial Production May Limit Euro Support
The Euro could shed some of its support on Monday, though, if October’s Eurozone industrial production shows another sharp decline on the year.
Signs of a sustained loss of momentum within the manufacturing sector could leave EUR exchange rates exposed to selling pressure.
As long as the Eurozone economy appears on track to experience a fresh contraction in the fourth quarter, leading to a double-dip recession, support for the single currency looks set to weaken.
Unless industrial production shows a strong rebound on the month the GBP/EUR exchange rate could find some temporary support at the start of the week.