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GBP to EUR Exchange Rate Rebounds Slightly Following Tuesday?s No-deal Brexit Panic Plunge

January 30, 2019 - Written by James Fuller

A weaker US Dollar (USD) has left the Euro more appealing this week, and this helped it to push the British Pound to Euro (GBP/EUR) exchange rate lower in recent sessions. The Euro also capitalised on the Pound’s Tuesday evening Brexit-related weakness, but the pair rebounded slightly on Wednesday morning as Brexit hopes persisted.

After last week’s impressive surge from 1.1327 to 1.1581, GBP/EUR has tumbled this week so far. Overnight, GBP/EUR touched on a weekly low of 1.1424, and currently trends closer to the level of 1.1468.

While GBP/EUR has seen more bearish movement this week, it has kept a good chunk of last week’s surge and remains well above the levels seen at the beginning of the month.

This indicated that despite a rise in No-deal Brexit fears from the UK political developments on Tuesday, investors are still more hopeful in general that a worst-case scenario No-deal Brexit can be avoided.

It also indicated that despite some recent Eurozone data being stronger than expected, it was not strong enough to make investors notably more optimistic about the cloudy Eurozone economic outlook.

GBP Exchange Rates Steadies Following Tuesday’s Brexit Plunge

On Tuesday, UK Parliament took part in another day of debate regarding the Brexit process. At the end of the day though, the Brexit process appeared no closer to any kind of change in tone that would help avoid a No-deal Brexit.

In fact, No-deal Brexit fears actually worsened.

MPs voted in favour of the ‘Brady amendment’, which asks for the government to renegotiate the issue of the Irish backstop with an alternative arrangement.

As the EU has indicated it will not renegotiate the deal, news that Prime Minister Theresa May would return to Brussels and attempt to reopen negotiations has only worsened concerns that the UK is running out of time to agree on a way to handle Brexit.

This is especially true as Parliament voted against the so-called ‘Cooper amendment’ that would pressure the government into delaying the formal Brexit date, as well as voting down the ‘Grieve amendment’, which would give lawmakers more say in influencing the course of Brexit debate.

Revived No-deal Brexit jitters caused Sterling to slump overnight, but investors were hesitant to keep selling the British currency today.

Investors bought the currency back again, as analysts continued to predict that a delay to the Brexit date was still likely as the clock on Brexit runs out of time.

EUR Exchange Rates Benefit from Weaker Rivals and Stronger Eurozone Data

Following weak Euro performance in recent weeks, the shared currency has seen a boost in demand this week. It has benefitted from weakness in the Pound, as well as weakness in its biggest rival the US Dollar (USD).

The US Dollar has been sold due to US political jitters. As it has a negative correlation with the Euro, this has bolstered Euro demand.

On top of rival weakness though, the Euro has found support in some stronger than expected data from the Eurozone this week, particularly from France.

Despite ‘yellow vest’ protests across France towards the end of 2018, the nation’s economy actually performed better than expected in recent months.

French consumer confidence rose to 91 in January, and the nation’s Q4 growth rate projection came in at 0.3% rather than the expected 0.1%.

Germany’s latest consumer confidence survey from GfK also beat forecasts, climbing to 10.8 rather than the expected drop to 10.3. These stats took some edge off fears that the Eurozone economy was rapidly slowing.

GBP/EUR Exchange Rate Forecast: Eurozone Growth and Unemployment Stats Ahead

Developments and reactions regarding this week’s Brexit news is still ongoing, and is likely to drive the Pound’s movement for the remainder of the week.

Concerns that the process could end with No-deal could keep Sterling from advancing much, but if there are any signs that the EU will change its negotiation stance or if UK MPs are becoming more likely to back a delay to the Brexit date, Sterling could surge.

Demand for the Euro is still limited amid expectations that the Eurozone economy will slow considerably this year, but the shared currency could find more support and push GBP/EUR lower if upcoming Eurozone data impresses investors.

Thursday’s slew of Eurozone stats include German retail sales and unemployment, French inflation figures, and most vitally the Eurozone’s latest overall growth and unemployment stats.

Friday will follow with the Eurozone’s January manufacturing PMIs and January inflation rate projections.

If Eurozone inflation rate figures beat expectations it could bolster European Central Bank (ECB) interest rate hike bets and knock the Pound to Euro exchange rate lower.
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