Euro Pound (EUR/GBP) Exchange Rate Edges Higher as Hopes over May?s Brexit Deal Fade

March 5, 2019 - Written by John Cameron

STORY LINK Euro Pound (EUR/GBP) Exchange Rate Edges Higher as Hopes over May?s Brexit Deal Fade

EUR/GBP Exchange Rate Rises as Labour MPs Unwilling to Back May’s Deal

The Euro Pound (GBP/EUR) exchange rate edged higher today and is currently trading around £0.8629.

Sterling (GBP) fell against the Euro (EUR) following comments from Labour’s Shadow Chancellor, John McDonnell, in which he indicated that few Labour MPs would be willing to back Prime Minister Theresa May’s Brexit deal on 12 March.

This has caused increasing concern for GBP investors, as fears are beginning to mount that the parliamentary divide could decrease the likelihood of May’s deal passing, while also hindering any developments between the UK and EU.

McDonnell said:

‘We’re trying to ensure our members don’t have to vote for Theresa May’s deal to get to that stage [of backing another referendum].’

The Euro, meanwhile, has benefited from generally positive economic data releases today, with Spain’s Markit Services PMI figures for February increasing above consensus to 54.5.

These were then followed by the flash Eurozone composite PMI figures for February, which also increased to a better-than-expected 51.9. These gains were further buttressed by positive Eurozone retail sales.

Chris Williamson, a Chief Business Economist at IHS Markit, commented on today’s PMI figures, saying:

‘The final PMI for February indicated a slightly improved performance compared to the flash estimate, lifted higher than January in part due to the further easing of one-off dampening factors such as the yellow vest protests in France and new auto sector emissions rules.’

GBP/EUR Exchange Rate Falls on Gloomy Economic Forecasts

The Pound, meanwhile, failed to benefit from the publication of the UK Markit Services PMI figures for January, which climbed to 51.3 and avoided the consensus of a contraction.

Many of the analysts, meanwhile, remained particularly gloomy about the UK economy, with Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, saying:

‘Once again this month, the lifeblood of the sector continued to leak away with Brexit indecision striking another blow to new orders and employment in February. Any hoped-for progress next month looks like it will be equally stifled, as services activity heads for its weakest quarter since late 2012.’

Today also saw weak UK like-for-like retail figures for February, which fell below expectation by 0.1% and further weakened confidence in Sterling.

EUR/EUR Outlook: ECB Interest Rate Decision in Spotlight

There are no notable Eurozone data release due to for tomorrow, with the Euro more likely to be driven by political factors such as Brexit.

The UK, meanwhile, will see a speech by the Bank of England’s Sir Jon Cunliffe, the Deputy Governor of Financial Stability, and with any dovish comments about the UK economy this could see the Pound fall further.

The EUR/GBP exchange rate, however, is more likely to be dictated by Brexit developments tomorrow, while most Euro traders will be looking ahead to Thursday, which will see the European Central Bank announce its interest rate decision.

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