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GBP to EUR Exchange Rate Sheds Last Week’s Gains as UK Government Plans Fourth Meaningful Vote

May 9, 2019 - Written by Minesh Chaudhari

No matter how impressive last week’s British Pound to Euro (GBP/EUR) exchange rate gains were, the pair has essentially shed all of those gains this week as of the time of writing on Thursday afternoon. A return to UK political uncertainty and a lack of progress on Brexit left the Pound unappealing, as the government appeared to plan a fourth meaningful Parliament vote on its unpopular Brexit plan.

Last week saw GBP/EUR open the week at the level of 1.1575 and surge over a cent to close near the level of 1.1759.

On Monday, GBP/EUR briefly touched a yearly high of 1.1799 – which was the best level for the pair in almost two years, since May 2017. Since then though, GBP/EUR has shed more or less all of those impressive gains. At the time of writing today, GBP/EUR was trending closely to the level of 1.1572.

The Pound was already unappealing this week, but due to weakness in rival currencies and Eurozone economic hopes the Euro has capitalised more easily.

GBP Exchange Rates Lose Their Shine as Hopes for Brexit Deal Fade

Much of the Pound’s appeal that saw it register impressive gains last week have more or less vanished, as the UK government’s cross-party negotiations with the opposition Labour Party are increasingly perceived as being near collapse.

With the government confirming that Britain will take part in May’s EU elections, parties are beginning to prioritise campaigning for the elections rather than the cross-party talks.

While the talks have yet to fully collapse, analysts have been doubting their success for some time already, and investors are becoming more convinced that they will fail too, pricing a soft Brexit out of the Pound for now.

According to David Madden, Analyst at CMC Markets:

‘Sterling has come under pressure again as the uncertainty surrounding Brexit, and the lack of clarity in regards to the situation has chipped away at investors’ confidence in the Pound. It was confirmed the talks between the Conservative Party and the Labour Party will continue today, but traders aren’t holding out much hope. The Pound lost ground against the US Dollar and the Euro.’

Continued speculation that a second referendum of some kind is seeing stronger support in the Labour Party has failed to bolster Pound demand, leaving it tumbling as hopes for a cross-party deal unwind.

EUR Exchange Rates Climbing on Rival Weakness and Eurozone Growth Hopes

Similarly to the Pound, the Euro’s movement this week is almost a mirror-image of the movement seen last week.

While last week saw investors selling the Euro despite signs of strength in Eurozone economic data, this week has seen the Euro gaining strongly even while there are lingering uncertainties in the bloc’s economic outlook.

Rising market confidence in the Eurozone’s economic outlook has been largely due to a few stronger than expected ecostats from Germany. So far this week, Germany’s industrial production report was particularly supportive.

The data indicated that Germany’s factory activity has not been as poor as feared and could lead to stronger than expected German economic growth for Q1 2019.

It also left Euro investors more eagerly anticipating upcoming German data, such as trade data due tomorrow and growth data expected next week.

On top of data though, the Euro has benefitted from weakness in major rival currencies. Amid weak US data and concerns that US-China trade tensions could have a negative impact on the US economy, a slightly weaker US Dollar (USD) has left the Euro more resilient.

GBP/EUR Exchange Rate Forecast: German Data and Brexit Speculation in Focus

Some data due for publication tomorrow could influence some late-week Pound to Euro exchange rate movement, but as the data will be relatively low-influence compared to market priorities, the pair may not see much of a shift.

Starting off the morning will be Germany’s March trade balance report. If the data shows that German trade was stronger than expected in March, the Euro could see stronger support as German trade jitters would lighten.

France’s March industrial production data could be influential as well.

Overall though, the data is unlikely to cause significant Euro movement as investors anticipate next week’s German growth report, which could bolster European Central Bank (ECB) interest rate hike bets if they impress.

Similarly, tomorrow’s UK growth and production stats are unlikely to cause a significant shift in Pound demand as Pound to Euro exchange rate investors remain focused on political and Brexit developments.
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