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Pound Euro Exchange Rate News: GBP/EUR Muted as Brexit Issues Continue

November 23, 2021 - Written by John Cameron

Pound (GBP) Faces Pressure as Northern Ireland Negotiations Remain Unresolved

The Pound to Euro (GBP/EUR) exchange rate is on the back foot so far today as the UK softens their stance with regards to Brexit talks, whilst the Euro relishes from strong PMI Flash data.

Sterling remains under pressure as UK-EU negotiations surrounding the Northern Ireland protocol continue. The future of the UK’s relationship with Europe is still ambiguous, however the UK appears to have softened their attitude towards triggering Article 16.

Spokesperson for UK Prime Minister, Boris Johnson, said:

‘Our preference remains to agree a negotiated solution if we can. Of course, we will use Article 16, the safety mechanism, if solutions can't be found.

We continue to believe that the conditions for triggering that safety mechanism of Article 16 have been met, that remains the Government position but we will continue to look for a consensual negotiated solution.’

If a deal cannot be struck and Article 16 is triggered, GBP investors worry a trade war between the UK and the EU may occur.

Moreover, the UK PMI Flash data was released this morning with marginal decline in the November Composite figures shown.

The Manufacturing PMI Flash grew to 58.2, exceeding the 57.3 forecast whilst the Services PMI Flash declined to 58.6 from the previous 59.1.

Duncan Brock, Group Director at CIPS, said:

‘Growth in private sector business continued in November, with a reversal of fortunes between the sectors still evident as services stormed ahead fuelled by consumer spending on hospitality but manufacturing progress was held back by supply chain snags.

Shortages of staff and production stoppages due to a lack of supplies added to frustrations in the manufacturing sector as some machines fell silent.

Service firms saw new orders escalate to the highest extent since June and overseas orders rose at the strongest pace since 2018 as the opportunities for international travel accelerated.’

Euro (EUR) Strengthens amid Better-Than-Expected PMI Flash Figures

At the same time, the Euro (EUR) has gained ground since the beginning of today’s session in comparison to GBP due to stronger-than-expected growth in the Eurozone’s Services and Manufacturing sectors.

The Services PMI Flash rose from 54.6 to 56.6; an increase in activity rather than the forecast decline.

Chief Business Economist at IHS, Chris Williamson, said:

‘A stronger expansion of business activity in November defied economists’ expectations of a slowdown, but is unlikely to prevent the Eurozone from suffering slower growth in the fourth quarter, especially as rising virus cases look set to cause renewed disruptions to the economy in December.

The service sector’s improved performance may meanwhile prove frustratingly short-lived if new virus fighting restrictions need to be imposed.’

Today’s PMI Flash data has boosted EUR but rising Covid cases may hinder the single currency market.

GBP/EUR Exchange Rate Forecast: Pound Faces Headwinds amid Brexit’s Uncertain Future

Looking ahead, the uncertainty surrounding Brexit negotiations could see the Pound to Euro exchange rate (GBP/EUR) infused with volatility going forward, whilst EUR could struggle to attract support as Covid cases surge throughout Europe’s mainland.

The Pound (GBP) may struggle for improvement this week due to a lack of notable data expected to be released. However, speeches from Bank of England (BoE) Governor, Andrew Bailey, and policymaker, Jonathan Haskel, on Thursday may impact GBP exchange rates. Will some hawkish remarks help to bolster BoE rate hike bets?

Various speeches expected to be delivered from European Central Bank (ECB) policymakers this week may also influence the Euro, with any reinforcing of the bank’s dovish bias likely to weaken the single currency.

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