GBP EUR Exchange Rate Slides as Government Supreme Court Appeal Begins

December 5, 2016 - Written by John Cameron

STORY LINK GBP EUR Exchange Rate Slides as Government Supreme Court Appeal Begins

The GBP EUR exchange rate fell this morning after initially rising to its best levels since the UK’s vote to leave the EU as Sterling was pressured lower by the UK government’s Supreme Court appeal.

Pound Euro (GBP EUR) Pressured by Supreme Court Appeal

The Pound Euro (GBP EUR) exchange rate slid this morning as the UK government made its appeal to the Supreme Court, seeking to overturn a High Court judgement that the government requires a vote in parliament before it is able to trigger Article 50 of the Lisbon Treaty and begin the 'Brexit' process.

The government is making the argument that its prerogative powers gives it the ability to both make and repeal treaties such as Article 50 without the consent of parliament. Attorney General, Jeremy Wright QC opening the appeal by saying;

‘The use of prerogative in foreign affairs is not ancient relic but a ...fundamental pillar of our constitutional state. The need [for governments] to maintain control of strategy and policy matters is clear and compelling.’

Investors fear that should the appeal be successful there will be little to stop the government from pursuing a ‘hard Brexit', which would likely lead to the UK losing access the single market in order to gain stronger controls on immigration.

Euro Exchange Rate Shakes off Renzi Resignation

After initially tumbling this morning due to Italian Prime Minister Matteo Renzi’s resignation the Euro quickly recovered, reaching a two-week high against the Pound.

Renzi had vowed to quit if his constitutional reforms were rejected in Sunday’s referendum, an outcome that had been widely predicted in recent weeks.

With the result priced in to a certain extent, his resignation had a limited impact on the single currency.

Italy is no stranger to political instability having had 65 governments since the Second World War, and analysts predict that an interim government is likely to formed, led by finance minister Pier Carlo Padoan, until the general election in 2018.

This has helped to allay fears that a populist party like the Five Star Movement may have been able form a new government if a snap election was called.

GBP EUR Exchange Rate Forecast: Eurozone GDP Data due Tomorrow

The GBP EUR exchange rate may see some movement on Tuesday with the release of the latest Eurozone GDP figures.

While investors currently predict that Eurozone GDP will hold at 1.6% in the third quarter, an unexpected rise could see an uptick in the Euro. This may also help to temper the European Central Bank’s (ECB) plans to extend its economic stimulus when it meets for its latest rate meeting on Thursday.

Meanwhile, a lull in UK data in the first half of the week may prevent Pound movement as the currency remains under pressure from the government's appeal to the Supreme Court.

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