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British Pound (?) to Euro (?) Exchange Rate: GBP/EUR Slips as Fresh UK Political Jitters Weigh

February 20, 2019 - Written by Tim Boyer

The Brexit speculation and hopes that gave the British Pound to Euro (GBP/EUR) exchange rate a leg up yesterday quickly lightened today, as the pair slipped from its best levels. Fresh political uncertainties emerged in Britain too, putting further pressure on the Brexit-embattled Pound.

Could GBP/EUR be in for a bigger shift in trajectory this week? Since opening the week at the level of 1.1414, GBP/EUR has generally trended with an upside bias. Yesterday, GBP/EUR saw a jump in demand that took it to a February high of 1.1529, but the pair has slipped again since then.

GBP/EUR was trending around quarter of a cent lower today, and at the time of writing was trending near the level of 1.1488.

Political jitters made investors hesitant to keep buying the Pound, while the Euro benefitted from weakness in rivals as well as some slightly better than forecast Eurozone data throughout the day.

Pound Sterling (GBP) Exchange Rates Sold on Fresh UK Political Uncertainties

On Tuesday, speculation that the UK and EU could reach some sort of breakthrough on Brexit talks during negotiations on Wednesday led to a brief jump in demand for the Pound.

However, during Wednesday’s session investors sold the Pound again. Analysts speculated that even if progress was made in UK-EU Brexit negotiations, it may not be enough to bolster enough support to push the deal through Parliament.

With less than 40 days until the Brexit is set to formally take place, investors are becoming more anxious that a deal will not be reached and a No-deal Brexit will remain on the cards.

The Pound saw additional pressure on Wednesday from news that three members from the UK Conservative Party had quit.

The three MPs had defected to the independent group formed by defecting Labour Party members earlier in the week.

Sterling tumbled on concerns that further fractures may be ahead in UK politics, even though time is running low on the Brexit process.

UK Prime Minister Theresa May said today that the Brexit vote would return to Parliament as soon as possible:

‘We have listened to the House of Commons, we are working on the views of the House of Commons with the European Union, and we will bring a vote back when it is the right time to do so.’

Euro (EUR) Exchange Rates Avoid Worst Levels as Data Comes in Slightly Higher

While investors remain anxious about the Eurozone’s economic outlook and worryingly slow economic growth in Germany, the Euro was able to rebound slightly versus the Pound today.

The Euro benefitted from weakness in rivals like the Pound and the US Dollar (USD). The US Dollar was weaker as investors were less eager to hold onto safe haven currencies and more eager to take risks.

As well as weakness in rivals though, the Euro found a little support in today’s Eurozone ecostats.

While not hugely influential, Wednesday’s Eurozone data did generally beat market expectations.

Germany’s January PPI stats beat forecasts in both major prints, coming in at 2.6% year-on-year and climbing to 0.4% month-on-month.

The Eurozone’s February consumer confidence projection was a little better than expected too, lightening to -7.4 rather than the expected -7.8.

GBP/EUR Exchange Rate Forecast: Key German Data in Focus

The Euro edged higher versus the Pound today, but its gains were limited as investors remain anxious about the Eurozone economic outlook.

This is keeping the Euro under pressure, but the shared currency could strengthen towards the end of the week if upcoming Eurozone data impresses investors.

Thursday will see a slew of influential Eurozone ecostats published, including Germany’s key January inflation results and Markit’s February PMI projections.

These stats could prove particularly influential if they surprise investors. Stronger Germany inflation data could boost European Central Bank (ECB) interest rate hike bets a little, and strong PMI stats could offset Eurozone growth jitters a little.

Key data will be published on Friday as well, including German growth rate figures and the Eurozone’s overall January inflation rate figures.

The Pound could be in for relatively limp movement unless there are more UK political developments.

If Brexit complications only worsen the Pound to Euro exchange rate could tumble, but any signs of a breakthrough in the process would leave the exchange rate more appealing.
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