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Pound Euro (GBP/EUR) Exchange Rate Dips, Brexit Uncertainty Rises Ahead of European Summit

October 16, 2019 - Written by John Cameron

GBP/EUR Exchange Rate Eases, DUP Criticise Boris Johnson’s Brexit Deal

The Pound Euro (GBP/EUR) exchange rate eased by -0.3% today, with the pairing currently trading around €1.152 as doubts over Brexit increase after the DUP have called into question Prime Minister Boris Johnson’s newly proposed withdrawal agreement. A spokesperson for the party commented that ‘it would be fair to indicate gapes remain and further work is required’.

As a result, Sterling remained subdued against the Euro as doubts increase over whether Boris Johnson will be able to secure a workable Brexit deal with the European Union by the October 31 deadline.

Michael Creed, Ireland’s Agriculture Minister, was optimistic, however, saying:

‘[I]f we do get a deal in Brussels on Brexit we have been here before with the withdrawal agreement which didn’t get through the House of Commons so there are some hurdles to be cleared yet and I’m not underestimating those in any way.’

‘They are significant and reflective of the magnitude of the challenge but we remain hopeful.’

Today, however, will see Michel Barnier, the EU’s Chief Brexit Negotiator, announce whether the new Brexit deal will be signed off by the EU27 on Thursday’s EU Council summit. However, if the EU rejects the Conservative Government’s proposal, we could see Sterling fall further against the European currency on heightened no-deal fears.

EUR/GBP Exchange Rate Edges Higher Despite Weak Eurozone Economy

The Euro improved on a weaker Pound today despite today’s release of the year-on-year Eurozone inflation figure for September, which was unexpectedly revised down to a three-year low from 1% to 0.8%.

Analysts at Reuters commented:

‘The new drop is likely to raise new concerns on the state of the [Eurozone] economy and could reignite the debate within the European Central Bank on how to pursue its goal of keeping inflation below, but close to 2% over the medium term… The revision was due to lower-than-expected inflation for industrial products, in a fresh worrying sign for the bloc’s manufacturing sector which faces drops in output and a fall in confidence.’

The UK-EU Brexit talks are also remaining a key focus for Euro investors today, but with doubts of a deal emerging between the two ahead of Thursday’s summit is leaving European markets feeling jittery on the increased prospect of a no-deal ahead of the October 31 deadline.

GBP/EUR Outlook: Brexit Developments to Remain Firmly in Driving Seat

Pound (GPB) traders will be looking ahead to tomorrow’s release of September’s UK retail sales figure, which is expected to flatline from -0.2% to 0%.

Meanwhile, Euro traders will be paying close attention to US-China trade developments, with any signs of a flare-up between the two superpowers benefiting the safe-haven European currency.

Brexit developments, however, will continue to drive the GBP/EUR exchange rate, with Sterling traders looking ahead to tomorrow’s’ European Council Summit. Any indications of a UK-EU Brexit breakthrough could stimulate a buying frenzy in the Pound as the odds of a no-deal would considerably fall.

Nevertheless, if the DUP continue to raise doubts over the Irish backstop, we could see Sterling fall on heightened fears of the deal failing to successfully pass through Parliament.

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