Pound Euro (GBP/EUR) Exchange Rate Rebounds following Earlier Slump
(Updated 15:00, 7/6/22) The Pound Euro (GBP/EUR) exchange rate has regained its earlier losses as investors hope Boris Johnson’s no confidence vote victory will bring some political stability to the UK.
Now that Johnson has survived the vote, he is likely safe for another year. Therefore, the uncertainty around his premiership his abated somewhat. That said, it has not completely cleared up so the Pound (GBP) may find its gains limited.
Meanwhile, the Euro (EUR) was dented by poor German data this morning. Factory orders in Europe’s largest economy unexpectedly slumped, worrying EUR investors.
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Pound Euro (GBP/EUR) Exchange Rate Turbulent after No Confidence Vote
The Pound Euro (GBP/EUR) exchange rate rebounded this morning after falling sharply overnight as the UK’s political turmoil continues to cause volatility.
Meanwhile, the Euro (EUR) faces headwinds after an unexpected contraction in German factory orders.
Pound (GBP) Slumps and Rebounds as Instability Continues
The Pound (GBP) experienced some turbulence this morning, with GBP/EUR slumping half a cent just as the European session was about to begin.
Sterling then regained most of these losses in a sharp rebound, but remains lower overall.
The volatility comes as markets react to last night’s no confidence vote in Boris Johnson. Many had hoped that the vote would bring political stability after weeks of uncertainty, drawing a line under the ‘partygate’ scandal and allowing the government to focus on the UK cost-of-living crisis.
However, 41% of Tory MPs voted to remove Johnson as Prime Minister, and many of the rebels still refuse to back him. While Johnson’s allies are trying to claim the vote as a ‘decisive’ victory, others see his position as untenable.
William Hague wise as usual.
"They are not a faction that has been seen off, or an alternative policy direction that has been defeated. They represent instead a widespread feeling, a collapse of faith, that almost certainly cannot be repaired or reversed."https://t.co/h10nuX241s— Ruth Davidson (@RuthDavidsonPC) June 6, 2022
Despite the vote, the UK’s rocky political landscape is relatively unchanged.
One factor that may be consoling GBP investors is a decent upward revision to the UK’s services PMI. The finalised score came in at 53.4, up from the flash estimate of 51.8. This means the UK’s vital services sector is slightly stronger than initially thought.
Euro (EUR) Pressured by Poor German Data
The Euro, meanwhile, may have suffered a setback earlier this morning after some poor German data.
Factory orders in Germany contracted by 2.7%, rather than growing by 0.3% as economists had expected. Germany is Europe’s largest economy and an industrial powerhouse. A drop in factory orders could spell trouble for the Eurozone.
OUCH! #Germany April factory orders crater -2.7% in Apr MoM – a 3rd straight drop – mainly driven by a decline in foreign orders. That brought the annual number down 6.2%. Economists had predicted a 0.3% monthly gain. Economy faces uncertainty soaring energy costs, supply limits. pic.twitter.com/KpFQf8oJIb
— Holger Zschaepitz (@Schuldensuehner) June 7, 2022
This is the third successive month of declining orders in Germany. The country – which was still reeling from the pandemic – has been battered by the Russia-Ukraine war, surging energy prices, supply-chain snarl-ups and recent lockdowns in China.
Pound Euro Exchange Rate Forecast: More Volatility Ahead?
As the day goes on, we could see more movement in GBP/EUR. With both currencies facing headwinds, the pairing could waver.
While markets continue to digest the no confidence vote, and MPs and analysts speak out, Sterling could face more turbulence.
As for the Euro, news from the Russia-Ukraine war could affect the single currency. Recently, the sanctions war between the Kremlin and Brussels has hurt EUR by increasing concerns about energy insecurity and inflation in Europe. If tensions continue to rise, EUR may stumble.