November 27, 2018 - Written by David Woodsmith
STORY LINK British Pound to Euro Exchange Rate Falls on Trump’s Dig at Brexit Agreement
Pound Euro (GBP/EUR) Exchange Rate Falls on Trump’s Dig at Brexit Agreement
The Pound Euro (GBP/EUR) exchange rate dropped today, and is currently trading at €1.1273, after US President Donald Trump criticised the Brexit withdrawal agreement and raised doubts about future US-UK trade.
EUR found strength this week after Italy showed signs of compromise over its controversial budget, with the deficit reportedly to be slashed from the proposed 2.4% to anything as low as 2%.
Deputy Prime Minister Luigi Di Maio said:
‘If, during the negotiating process, the deficit has to be reduced a bit, that's not a big deal.’
The EUR/GBP exchange rate was strengthened by the UK’s Brexit withdrawal agreement being rubberstamped by the EU over the weekend, restoring market confidence in the single currency as the two main concerns – Italy’s budget and Brexit – were temporarily appeased.
Pound Euro (GBP/EUR) Exchange Rate Hit by Trump’s Criticism of May’s Brexit Deal
The Pound Euro (GBP/EUR) exchange rate was hit today by Donald Trump’s latest comments on May’s Brexit deal with the EU, saying:
‘It sounds like a great deal for the EU. I think we have to take a look at seriously whether the UK is allowed to trade because right now, if you look at the deal, they may not be able to trade with us and that wouldn’t be a good thing.’
Trump’s comments struck at a crucial time – with on-going Brexit negotiations in urgent need of domestic and international support, as May’s attempts to convince Parliament being the final hurdle for the withdrawal agreement.
The Pound (GBP) dipped against the Euro as market confidence dwindled in Sterling, with concerns about May’s ability to convince MPs and continuing worries over the UK economy deterring Pound investors.
Euro Pound (EUR/GBP) Spikes as Italy Hints at Budget Compromise
The Euro Pound (EUR/GBP) exchange rate meanwhile has risen on reports of Italy’s decision to reduce its budget and show a willingness to compromise over the EU and avoid any disciplinary action coming from Brussels.
However, later on Monday Italy’s Prime Minister Giuseppe Conte, along with his two deputies, Matteo Salvini and Luigi Di Maio, made a joint statement contradicting the earlier reports, saying: ‘The objectives that have already been fixed are confirmed.’
If Italy’s budget is pushed back into the spotlight, the single currency could face turbulence once again as the EU will be forced to penalise Italy, which could send investors fleeing from EUR.
In other Euro news, today will see the European Court of Justice (ECJ) consider Article 50 of the Lisbon Treaty, determining whether or not it can be revoked.
This is an important consideration, and will affect the political impact of the Brexit process, with the MP John Kerr, who originally drafted the clause, saying:
‘The die is not irrevocably cast, there is still time and, until the UK has left the EU, the Article 50 letter can be withdrawn.’
GBP/EUR Outlook: Italy and Brexit Concerns Threaten to Return
The GBP/EUR exchange rate will remain sensitive to developments over Brexit, with increasing pressure coming from Trump’s comments shaking confidence in May’s withdrawal agreement.
With any continuing signs of a divided Parliament, and any threats of votes of no-confidence being publically aired, the Pound could face further volatility.
Tomorrow will also see the Bank of England’s (BoE) Financial Stability Report, which will provide an insight into the stability and resilience of the UK’s financial sector.
With Brexit dominating headlines it is likely that the BoE will remain cautious until positive developments over the EU-UK withdrawal agreement manifest.
EUR, meanwhile, is likely to be affected by any further comments from Italy that may go against this week’s hint at a possible compromise.
Any signs of Italy refusing to amend its budget will likely hit EUR exchange rates, as the EU will have to reconsider disciplinary action against Rome.
Overall, the GBP/EUR exchange rate will be sensitive to political developments rather than economic ones for the next few days.
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TAGS: Pound Euro Forecasts