Euro Pound (EUR/GBP) Exchange Rate Edges Higher, Downing Street Divided on Brexit Plans

October 24, 2019 - Written by John Cameron

STORY LINK Euro Pound (EUR/GBP) Exchange Rate Edges Higher, Downing Street Divided on Brexit Plans

EUR/GBP Exchange Rate Improves, UK Markets Await EU Brexit Extension Announcement

The Euro Pound (EUR/GBP) exchange rate edged higher today, with the pairing currently trading around £0.864 as Brexit uncertainty continues to haunt UK markets as Downing Street remains on divided on which course to take with its Brexit plans.

Prime Minister Boris Johnson is now split between forcing through his UK-EU Brexit agreement or force through a general election, which could potential jeopardise his premiership.

One Downing Street source commented:

‘Any time that parliament gets a vote for the delay, it will always choose delay. Therefore, if this parliament is unwilling to vote for a deal, we will have to go for a general election.’

UK markets are remaining cautious, however, as the EU27 is still set to announce whether it will back an extension to the current Brexit deadline. As a result, the Pound has found little support today with Brexit developments temporarily stalled.

In UK economic data, today saw the release of the UK BBA mortgage approvals figures which dipped from 42.527 to 42.310 thousand. However, with Brexit dominating headlines, this had a negligible effect on the GBP/EUR exchange rate.

EUR/GBP Exchange Rate Increases despite Weak German Economic Data

The Euro (EUR) improved on the weaker Pound (GBP) today despite the release of Germany’s flash Markit PMI Composite figure, which remained firmly in contraction territory at 48.6.

Chris Williamson, a Business Economist at IHS Markit, commented:

‘Optimism about future prospects deteriorated further in October to the lowest for over six years, commonly linked to global trade tensions, Brexit-related worries and increasingly gloomy economic forecasts.’

Germany’s export-reliant manufacturers have been increasingly hit by rising global economic uncertainties surrounding US-China trade disputes and the UK’s “paused” Brexit deal.

Paul Smith, the Principal Economist at IHS Markit, concluded that hopes of the German economy’s recovery in the final quarter had been “dashed”, further weakening market demand for the single currency.

EUR/GBP Outlook: Brexit to Remain in Driving Seat

Euro traders will be looking ahead to tomorrow’s release of November’s German GfK Consumer Confidence Survey, which is expected to ease from 9.9 to 9.8.

Tomorrow will also see the release of October’s German IFO business climate figure, which is also expected to dip from 94.6 to 94.5. As a result, we could see the Euro begin to lose its gains against the Sterling as concerns over the Eurozone’s economy increase against weakening German data.

Brexit developments will continue to drive the EUR/GPB exchange rate into the weekend. If Boris Johnson pushes for a general election, we could see Sterling weaken on heightened Brexit uncertainty as the UK-EU Brexit bill would effectively be dropped in the short-term.

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