GBP EUR Exchange Rate Slides over Further 'Brexit' Uncertainty

November 28, 2016 - Written by Ben Hughes

STORY LINK GBP EUR Exchange Rate Slides over Further 'Brexit' Uncertainty

The GBP EUR exchange rate has dropped by around a cent this morning as market sentiment towards the Pound continues to slide as a result of 'Brexit' fears.

Pound Euro (GBP EUR) Exchange Rate Pressured by 'Brexit' Concerns

The Pound Euro (GBP EUR) exchange rate continues to suffer from investor uncertainty over 'Brexit' as a cross party alliance of Conservative, Labour and Liberal Democrat MP’s have commissioned a report warning about the effects of a ‘hard Brexit'.

The study, which was created by the Centre for Economics and Business Research, showed that losing access to the single market would negatively impact every major economic sector including manufacturing, retail and finance, With Labour MP Chuka Umunna commenting that;

‘Every major sector of our economy is linked to the single market and could be harmed through an arrangement that prioritises one sector over another.’

This comes as the government is accused of ‘Cherry picking’ certain parts of the economy for special trade agreements with the EU once the UK leaves.

Legal Challenge May Hinder 'Brexit', Could GBP EUR Recover?

Adding further uncertainty to the 'Brexit' process is the legal battle over whether the vote for 'Brexit' was a vote to leave the single market.

Lawyers have argued that Britain would not automatically leave the European Economic Area (EEA) and that it would only happen if the British government triggers Article 127 of the EEA agreement.

This case has caused additional uncertainty about the UK’s fate after 'Brexit' after Prime Minister Theresa May hinted that a transitional agreement may be possible in a speech last week. The added confusion has weighed on Pound (GBP) however as investors steer clear of Sterling until things are cleared up.

Should the situation develop in such a way that a 'Hard Brexit' is avoided, the Pound Euro (GBP EUR) exchange rate could gain.

Pound Pressured by OECD Forecasts

Pound Sterling (GBP) exchange rates also suffered from the release of the Organisation for Economic Co-operation and Development (OECD) latest economic outlook report as it forecasts that Britain’s GDP will plummet from 2.0 in its November projections to 1.2 in at the same point in 2017.

Meanwhile the Europe’s GDP also suffered from a predicted slide, although the far more modest drop of 1.7 in 2016 to 1.6 in 2017 is unlikely to cause the Euro to suffer quite as much as Sterling.

GBP EUR Exchange Rate Forecast: Draghi to Speak in Brussels

The GBP EUR exchange rate may rally later today as European Central Bank President, Mario Draghi faces Economic and Monetary Affairs committee at the European Parliament in Brussels.

Draghi is likely to be quizzed about Brexit, Greece’s bailout, and the growing concern over Italy’s banking sector, however it will be questions about the ECB’s monetary easing programmes that will draw traders’ attention as any indication that the Bank is seeking to extend its quantitative easing programme past March 2017 is likely to cause the Euro to sink.

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TAGS: Pound Euro Forecasts Pound Sterling Forecasts