Pound Euro Exchange Rate News: GBP/EUR Subdued as Northern Ireland Protocol Deal Delayed

February 20, 2023 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Subdued as Northern Ireland Protocol Deal Delayed

GBP/EUR Exchange Rate Flat Amid Delayed Brexit Talks

The Pound Euro (GBP/EUR) traded sideways on Monday amid uncertainty over the status of a new deal to resolve the dispute over the Northern Ireland protocol.

At the time of writing the GBP/EUR exchange rate was trading at €1.1260, virtually unchanged from Monday’s opening levels.

Pound (GBP) Muted amid Northern Ireland Protocol Uncertainty

The Pound (GBP) held in a narrow range on Monday, amid some uncertainty over whether a deal to resolve the contentious Northern Ireland protocol is close or not.

Over the weekend reports suggested Prime Minister Rishi Sunak was preparing to announce a deal with the EU to break the deadlock over the protocol at the start of this week.

However, threats that up to 100 Conservative MPs could rebel against the deal appear to have forced Sunak to rethink those plans.

The government briefed that a new deal will not come on Monday and that a Tuesday statement in the House of Commons also appears unlikely.

Speaking to Sky News, Sammy Wilson, chief whip of the Democratic Unionist Party (DUP) discounted the chances of a deal being agreed this week.

‘He [Rishi Sunak] realises that there are barriers and hills to climb. He knows the kind of issues that have to be dealt with. I hope he does go into negotiations with a full understanding of what is required.’

The news comes as a disappointment to GBP investors, who had hoped a deal would help to alleviate tensions between the UK and EU and potentially boost future trade prospects.

Euro (EUR) Flat as Ukraine in Spotlight

The Euro (EUR) was also rangebound on Monday, with EUR investors growing increasingly nervous regarding the situation in Ukraine.

Markets fear an imminent escalation of the conflict as Russian President Vladimir Putin prepares to make a major speech on Tuesday.

Analysts expect Putin to announce a massive new ground offensive in Ukraine to coincide with the first anniversary of the conflict.

Meanwhile the Eurozone’s latest consumer confidence index printed in line with expectations, but failed to elicit much of a response from EUR investors.

GBP/EUR Exchange Rate Forecast: UK and Eurozone PMIs in Focus

Turning to Tuesday, movement in the Pound to Euro (GBP/EUR) exchange rate is likely to be primarily driven by the latest preliminary PMI releases from both the UK and Eurozone.

The UK figures are expected to show private sector growth contracted for the seventh consecutive month in January. Another decline will no doubt raise concerns over first quarter growth and pull the Pound lower.

In contrast, the Eurozone PMIs are forecast to report activity in the bloc’s private sector expanded again in February. Likely easing Eurozone recession fears and propelling the Euro higher.

Also, of note to EUR investors will be the publication of Germany’s latest ZEW economic sentiment index. Another improvement in sentiment may help to bolster the Euro.

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TAGS: Pound Euro Forecasts