Pound Euro Exchange Rate News: GBP/EUR Firms on NI Protocol Deal Optimism

February 27, 2023 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Firms on NI Protocol Deal Optimism

Pound Euro Exchange Rate Firms on Brexit Deal Optimism

The Pound Euro (GBP/EUR) exchange rate ticked higher on Monday, on the hopes for a new deal regarding the Northern Ireland protocol.

This saw the GBP/EUR exchange rate trade at around €1.1341 at the time of writing. Up roughly 0.2% from Monday’s opening levels.

Pound (GBP) Firms on Hopes for NI Protocol Deal

The Pound (GBP) trended higher against the Euro (EUR) and the majority of its other peers on Monday amid reports that the UK and EU are expected to agree on a deal to resolve the bitter dispute over the Northern Ireland Protocol.

Reports suggest UK Prime Minister Rishi Sunak and European Commission President Ursula von der Leyen with unveil the new agreement together on Monday afternoon.

The news has been well received by GBP investors who hope that the agreement will help to ease reason tensions between the UK and EU and result in a more amicable trade relationship between the two sides going forward.

However tempering the upside in Sterling are concerns over the potential hurdles any new deal could face to make it through parliament.

A number of Conservative MPs are expected to push back against the deal, particularly if it is unable to convince the Democratic Unionist Party.

Jacob Rees-Mogg, the former Brexit secretary, comments:

‘From what I’ve heard, he [Sunak] has done very well, but I’m not sure he has achieved the objective of getting the DUP back into powersharing, which is the fundamental point of it.

‘It will all depend on the DUP. If the DUP are against it, I think there will be quite a significant number of Conservatives who are unhappy.’

A rocky road through the House of Commons could take some of the shine off the Pound this week.

Euro (EUR) Muted as Eurozone Economic Sentiment Stalls

The Euro (EUR) traded in a narrow range on Monday following the publication of the Eurozone’s latest economic sentiment index.

February’s sentiment indicator printed at 99.7. This was a modes fall from 9.99 in January and fell short of a forecast rise to 101.

The slightly weaker-than-expected sentiment reading appeared to linked to ongoing concerns over high inflation, with analysts suggestions February’s index points to a stagnation of Eurozone economic growth in the first quarter.

Bert Colijn Senior Eurozone Economist at ING writes:

‘The economic sentiment indicator for February seems slightly less optimistic than the PMI. The broad picture that remains is one that shows an economy still struggling with high inflation but profiting from fading supply-side problems. This leaves economic growth around stagnation for the winter months.’

GBP/EUR Exchange Rate Forecast: Will Ukraine Concerns Limit Euro Upside Potential

Looking ahead, the Pound Euro (GBP/EUR) exchange rate may maintain a positive trajectory in the coming days amid ongoing concerns over the war in Ukraine.

EUR investors remain wary of a possible escalation of the conflict amid ongoing speculation of a spring offensive from Russia. Any signs this offensive could be imminent could put the Euro into a tailspin.

Meanwhile, in the absence of any notable UK economic data, the focus for GBP investors in the first half of this week is likely to remain on Brexit developments.

While confirmation of a new deal might cheer Sterling, UK politics could threaten to unravel any resulting gains if it looks likely Conservative MPs might rebel in large enough numbers.

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TAGS: Pound Euro Forecasts