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Pound Euro (GBP/EUR) Exchange Rate Slumps as Third Meaningful Vote Ruled Out

March 18, 2019 - Written by Frank Davies

Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps as Third Meaningful Vote Ruled Out

As the House of Commons Speaker ruled out the prospect of a third meaningful vote unless the Brexit deal sees a ‘substantial change’ the Pound Sterling to Euro (GBP/EUR) exchange rate slumped.

Investors were caught off guard by the move, having expected to see Theresa May put her rejected deal to a fresh parliamentary vote this week.

This left Pound Sterling on a weaker footing, with markets still seeing little sense of clarity over the future of the UK’s relationship with the EU.

With less than a fortnight left before the Article 50 exit deadline investors have little incentive to favour the Pound over its rivals.

Narrowed Eurozone Trade Surplus Weighs on Euro (EUR) Exchange Rates

The mood towards the Euro, meanwhile, also weakened as January’s Eurozone trade balance data showed a sharp decline.

As the trade surplus narrowed from 17 billion to just 1.5 billion on the month this raised fresh worries over the outlook of the Eurozone economy.

With global trade tensions looking unlikely to ease in the near future, as the US and China have yet to finalise a fresh trade deal, this weaker showing weighed on EUR exchange rates.

However, as forecasts had pointed towards the balance slipping into a state of deficit the downside pressure on the Euro was ultimately limited.

Slowing UK Wage Growth May Add to GBP/EUR Exchange Rate Bearishness

Although Brexit developments look set to dominate the outlook of the GBP/EUR exchange rate this week focus will also fall on January’s UK labour market data.

With average weekly earnings forecast to see a loss of momentum in the three months to January, however, the data could put additional pressure on the Pound.

Any signs that the UK labour market is starting to loosen may also weigh on GBP exchange rates on Tuesday.

Ahead of the Bank of England’s (BoE) March policy announcement the Pound may struggle to find any particular degree of support, given current political and economic anxieties.

EUR Exchange Rates Vulnerable to Weakening Economic Sentiment

Further weakness may be in store for the Euro, on the other hand, if March’s ZEW economic sentiment surveys show a fresh deterioration.

Signs of weakening economic confidence could encourage further selling of the single currency as the odds of European Central Bank (ECB) dovishness increase.

As long as the indexes remain in negative territory EUR exchange rates are likely to maintain a bearish course, given previous signs of weakness within the Eurozone economy.

An uptick in the economic sentiment index could offer the Euro a boost, however, if businesses appear to shrug off worries over the economic outlook.
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