Heavy Losses Seen as GBP EUR Exchange Rate Drops Down to 1.13 on Brexit Fears

January 16, 2017 - Written by John Cameron

STORY LINK Heavy Losses Seen as GBP EUR Exchange Rate Drops Down to 1.13 on Brexit Fears

The British Pound to Euro exchange rate surged on Tuesday afternoon as investors reacted bullishly to the Brexit speech from UK Prime Minister Theresa May. May’s key statements included reconfirmation that Parliament would vote in the final Brexit deal after negotiations were over.

Demand for the Euro was mixed throughout the day as traders focused on buying the Pound and selling the US Dollar (USD). As a result however, the EUR lost over 1.5% against GBP.

[Previously updated 16/01/2017]

GBP EUR Demand Crashes as Investors Conclude that Hard Brexit is High Probability

The Pound has fallen to its lowest rate against the Euro since early November today, coming in at around 1.13.

This has followed a unification of investor and economist outlooks on tomorrow's Brexit speech from the Prime Minister.

The general consensus at the present time is that Theresa May will be announcing that the UK will be fully removed from the EU after the Brexit process is concluded, which means that single market access will no longer be possible.

It must be stressed that the PM has not explicitly indicated this official stance yet, but all signs nonetheless seem to pointing towards an economically traumatic ‘Hard Brexit’ rather than one of the more gentle variants, such as ‘soft’ or ‘smooth’.

Pound to Euro Exchange Rate Outlook: PM’s Speech Main Focus, UK Jobs Stats also Expected

The main event of the week for the UK will be Tuesday’s speech from Theresa May; this has not yet been assigned a time. If May is clear that UK access to the single market is not possible, then the Pound is expected to drop even further today.

If, however, she states that ‘Hard Brexit’ (with no single market access) is only one possibility and that some kind of transition can be arranged, then investors may well flock to Sterling and trigger a recovery against the Euro.

More solid news will consist of December’s inflation on Tuesday, which is expected to rise, as well as jobs stats on Wednesday.

Claims in December are set to rise, the unemployment rate has no change at 4.8% expected and a fractional uptick in earnings with bonuses in November has been anticipated.

Euro Trading Update: Bounce in Trade Surplus Firms EUR GBP Gains Today

The Euro has risen to a rate of 0.87 against the Pound today, following major GBP weakness and a strongly supportive piece of Eurozone trade data.

The day’s trade balance figure for November has shown a surplus expansion from 20.1bn to 25.9bn, far above the expected 22bn outcome.

Elsewhere, Italy has posted a falling construction PMI for December with a drop from 59.8 to 58.9.

Euro Future Forecast: ECB Speeches and Eurozone Confidence Stats Incoming, Gains Expected

The Euro’s current run of good luck may continue over Tuesday and Wednesday, given present predictions. Before then, however, the next notable development will be a speech from European Central Bank (ECB) official Peter Praet this afternoon.

Tuesday morning’s data will cover the ZEW economic sentiment index for January, which is forecast to show a German confidence rise from 13.8 to 16.5.

Moving on to Wednesday, further Euro Pound support may be generated by December’s inflation rate figures, which are expected to show a Eurozone rise across the board.

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TAGS: Currency Predictions Euro Forecasts Euro Pound Forecasts