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GBP to EUR Exchange Rate Kept Under Pressure amid Brexit Jitters and ZEW Eurozone Confidence Data

March 19, 2019 - Written by Tim Boyer

The British Pound to Euro (GBP/EUR) exchange rate has struggled to hold the highs seen over the weekend, as fresh Brexit uncertainties combined with some signs of strength in the Eurozone economy kept the Pound under pressure and offered the Euro some support. Investors now anticipate upcoming Brexit news and Eurozone data.

Despite a slightly stronger Euro, GBP/EUR still saw an impressive gain of around a cent and a half last week, climbing from the level of 1.1584 to 1.1737 throughout the week. GBP/EUR briefly touched on a yearly high of 1.1776 in the middle of the week, and the pair still trends less than a cent below those best levels.

After opening this week to fresh Brexit uncertainties and continued steady support for the Euro, GBP/EUR slipped slightly.

At the time of writing on Tuesday, GBP/EUR trended near the level of 1.1697 as slightly stronger than expected Eurozone data combined with Brexit jitters kept the Pound from recovering too much from yesterday’s slide.

GBP Exchange Rates Unappealing as Uncertainties over Brexit Process Weigh

At the beginning of the week, investors sold the Pound from its weekend highs on fresh doubts that the government’s Brexit deal would be able to pass through Parliament even in a third meaningful vote.

These concerns were exacerbated later in the day, when Speaker of Commons John Bercow indicated he may block the government from putting a third vote on the same deal to the House – at least not without substantial changes.

With the government’s Brexit deal potentially on ice for now, focus has turned towards the government’s negotiations with the EU to formally delay the Brexit process.

There are lingering concerns about the long-term uncertainty that would come from a delay, as well as small concerns that the EU may reject Britain’s attempts to delay Brexit.

As a result of this Brexit uncertainty, the Pound was unable to benefit too strongly from today’s UK job market report, even though much of the report printed stronger than market expectations.

The employment change figure unexpectedly jumped to 222k, and average earnings including bonuses came in at 3.4% rather than the expected slip to 3.2%.

On top of this, Britain’s key unemployment rate unexpectedly improved from 4% to 3.9%, the best unemployment rate in 44 years.

Brexit uncertainties weighed down on the Pound’s reaction to the report though, as did the Euro’s strength this week so far.

EUR Exchange Rates Benefit from Weakness in Rivals and Signs of Eurozone Strength

Following a long period of slowing Eurozone growth, and concerns that the Eurozone’s economic slowdown was even worse than initially expected, recent Eurozone data has started to give investors faint signs of optimism.

Data printing above market expectations has indicated to some analysts that the Eurozone’s economic performance may have taken a turn for the better towards the end of Q1 2019.

Those signs continued this week, after Eurozone trade data beat forecasts on Monday and ZEW’s economic sentiment stats from Germany and the Eurozone beat forecasts this morning.

While ZEW’s German current conditions figure fell short of the expected 11.7, coming in with a result of 11.1, the economic sentiment indexes both saw lighter than expected contractions.

German sentiment came in at -3.6 rather than -11, while the overall Eurozone figure printed at -2.5 – well above the expected -18.7.

It was also thanks to recent weakness in the US Dollar (USD), the Euro’s biggest currency rival, that the Euro was able to keep pressure on the Pound today.

GBP/EUR Exchange Rate Forecast: Pound Strength Limited as Brexit Delay Negotiations Anticipated

Movement in the Pound to Euro exchange rate is likely to remain a similar story for the rest of the week, with potential Brexit developments driving the Pound while the Euro is influenced by Eurozone data and US Dollar (USD) strength.

Unless there are any surprising developments regarding the UK government’s attempts for a third meaningful vote on its Brexit plan, Pound investors will be focused on UK-EU negotiations regarding the potential Brexit delay.

Will the process be delayed, and by how long? Once this is known, the Pound’s volatility could steady.

Upcoming UK data, as well as the Bank of England’s (BoE) policy decision on Thursday, are unlikely to be nearly as influential as potential Brexit developments.

Euro investors, on the other hand, will be paying close attention to how the US Dollar (USD) reacts to the Federal Reserve’s policy decision tomorrow evening.

That aside, major Eurozone PMI projections for this month, due on Friday, could also influence movement in the Pound to Euro exchange rate.
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