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GBP to EUR Exchange Rate Surges to New Yearly Best as No-deal Brexit Fears Lighten Further

February 27, 2019 - Written by James Fuller

Despite a lack of major developments in Brexit news today, the British Pound to Euro (GBP/EUR) exchange rate saw yet another day of strong gains. Markets continued to bet against a no-deal Brexit since the UK government confirmed that it would offer a Parliament vote on the subject if its Brexit plan is blocked once again.

Since opening this week at the level of 1.1517, GBP/EUR has only seen solid advances as no-deal Brexit fears lighten. After surging over a cent yesterday, GBP/EUR gained over another half a cent today and briefly touched on an impressive new high of 1.1706.

This was the first time GBP/EUR had reached above the key level of 1.17 since May 2017, indicating that Pound investors are more confident this week than they have been for quite some time.

Sterling has been able to more easily hold gains versus the Euro, as the latest Eurozone data has done little to make the Euro more appealing.

GBP Exchange Rates Rally Continues as No-deal Brexit Fears Lighten

Investors continued to pile into the Pound today, despite a lack of fresh stimulus driving Pound bullishness.

Instead, lingering optimism that the UK would be able to avoid a worst-case scenario no-deal Brexit left Pound investors bullish.

Since the UK government revealed its plans for the next steps on Brexit yesterday, the Pound has been able to sustain its gains. The government has finally offered MPs an official means to vote against a no-deal Brexit and the option to delay Brexit.

UK Prime Minister Theresa May laid out a plan for if the government’s Brexit plan is blocked by Parliament again in the next meaningful vote on the 12th of March.

If the vote fails, Parliament will vote on whether or not it wants a no-deal Brexit.

If Parliament does vote against a no-deal Brexit, the government will offer a vote on a short delay for the formal Brexit date.

Essentially, as investors increasingly bet against the likelihood that Britain will crash out of the EU without a deal, Sterling is soaring. According to analysts at asset management company Amundi:

‘Given the developments of the last few days, an extension is becoming more likely,’

EUR Exchange Rates Fail to Hold Ground amid Eurozone Economic Jitters

The Euro was unable to avoid steep losses versus Sterling yesterday.

The biggest cause of GBP/EUR movement was certainly Brexit developments, but the Euro was unable to hold its losses due to other factors weighing on the shared currency.

As notable Eurozone data has fallen short of expectations in recent weeks and the bloc’s economic outlook looks slow, investors have little reason to buy the shared currency.

Today’s Eurozone data was too mixed to give investors much reason to buy the Euro either.

The Eurozone’s February business confidence results came in at 0.69 rather than the expected 0.6, while consumer confidence printed at the forecast -7.4.

Services and economic sentiment stats beat forecasts but industrial sentiment unexpectedly contracted.

On top of the day’s mixed Eurozone confidence stats, demand for the Euro was limited by concerns that tensions between Italy and the EU could flare up again.

The EU criticised Italy’s economic imbalances and warned that the Italian government’s policies could be making things worse.

GBP/EUR Exchange Rate Forecast: German Inflation Report in Focus

As no-deal Brexit bets continue to lighten, the Pound could be on track for a week of solid gains. Investors are unlikely to sell the British currency unless there is a fresh obstacle in Brexit that makes a no-deal Brexit look more possible.

Britain’s GfK consumer confidence report for February is unlikely to influence the Brexit process or Pound in that way, so the Pound to Euro exchange rate will likely be influenced more by Eurozone data tomorrow.

The biggest focus for GBP/EUR tomorrow, save for surprising Brexit developments, will be France and Germany’s February inflation rate projections.

As German economic jitters have been a big cause of Euro weakness in recent weeks, if Germany’s inflation rate beats expectations it could bolster Euro demand.

French growth projections for Q4 2018 will be published too, and if there are no surprising datasets throughout the day Pound to Euro exchange rate investors will look ahead to Friday’s slew of notable Eurozone data instead.
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