The British Pound to Euro, US Dollar exchange rates avoided notable losses last week and even ended August higher overall despite gradually worsening fears that a no-deal Brexit is becoming a more likely outcome of Britain’s long drawn out Brexit uncertainty.
As investors bought the embattled Pound Sterling back from its worst levels in years, the British currency has sustained some of this recovery. However, the GBP’s potential for further recovery remains limited.
– The Pound-to-Euro exchange rate buys at €1.10669 today
– The Pound-to-Dollar exchange rate is valued at $1.21631 today
After opening last week at around 1.1015, GBP/EUR spent most of last week edging higher. After touching on a monthly high of 1.1084 near the middle of the week, GBP/EUR slipped again and trended closer to the level of 1.1030 towards the end of the week.
GBP/EUR has gained over half a cent since opening August at the level of 1.0966, and has recovered strongly from the decade low of 1.0646 seen on the 10th.
Pound to Euro (GBP/EUR) Exchange Rate Avoids Losses despite No-Deal Brexit Fears amid Eurozone Economic Jitters
Fears that a no-deal Brexit is becoming more and more likely worsened last week, as UK Prime Minister Boris Johnson acquired permission to prorogue UK Parliament for an unusually long 5 weeks.
The prorogation of five weeks before his new government’s Queen’s Speech, between the 9th of September and the 14th of October, has been seen as a move to prevent Parliament attempts to block a no-deal Brexit.
The Pound avoided significant losses against the Euro despite this though. Investors were hesitant to sell the Pound too much lower, and the Euro’s own weakness helped GBP/EUR to avoid major losses.
The Eurozone economic outlook remains weak, as German data continues to indicate the bloc’s biggest economy is struggling to recover from a huge slowdown. German recession fears persist.
European Central Bank (ECB) interest rate cut bets have risen too. While the latest Eurozone inflation data had little influence on ECB rate cut bets, analysts predict the data is likely to bolster the bank’s case for monetary policy easing soon.
According to Andrew Kenningham from Capital Economics:
‘There is nothing in today’s data releases to change the minds of ECB policymakers meeting the week after next: we still expect them to cut the deposit rate from -0.4% to -0.5% and to provide further strong hints that more QE is on the way,’
Pound (GBP) Exchange Rates Forecast: Week of Brexit Chaos May Be Ahead
UK Parliament is set to reopen briefly before the prorogation begins, but for a mere four days.
Parliament returns from recess on the 3rd of September and will remain active until the end of the week. The following Monday, suspension ahead of the Queen’s Speech will begin.
Opposition MPs are expected to take measures to prevent a no-deal Brexit, but unfinished legislation will be reset during prorogation so there may not be much chance of progress.
A no-confidence vote in the government is also possible, which would lead to fresh uncertainty and possibly a fresh general election if it succeeds.
While some UK data will be published next week, the possibility of Brexit chaos hitting headlines all week is likely to drive Pound movement.
Events to watch for the GBP include the Manufacturing PMI, the BRC Retail Sales Monitor, the 10-y Bond Auction, the Construction PMI, the UK Services PMI and the UK Consumer Inflation Expectations.
Euro (EUR) Exchange Rate Forecast: Major Eurozone Data Could Influence ECB Bets
The past week’s Eurozone data has been mixed, but with more influential data due in the coming week European Central Bank (ECB) interest rate cut bets could still be influenced.
Markit’s final Eurozone PMIs for August will be published from Monday through Wednesday, and the Eurozone’s July retail sales results will come in on Wednesday as well.
The week’s most influential German data will be factory orders on Thursday and industrial production on Friday.
Friday’s session will also see the publication of the Eurozone’s second Q2 Gross Domestic Product (GDP) growth rate projection, as well as employment change data.
If the week’s Eurozone data beats expectations, European Central Bank (ECB) easing speculation could soften slightly and the Pound to Euro exchange rate could strengthen.
Events to watch for the EUR include the Spanish Manufacturing PMI, the Italian Manufacturing PMI, the French Final Manufacturing PMI, the German Final Manufacturing PMI, the Final Manufacturing PMI, the Spanish Unemployment Change, the PPI, the Spanish Services PMI, the Italian Services PMI, the French Final Services PMI, the German Final Services PMI, the Final Services PMI, the Retail Sales, the German Factory Orders, the Spanish 10-y Bond Auction, the French 10-y Bond Auction, the German Industrial Production, the French Trade Balance, the Italian Retail Sales, the Final Employment Change and the Revised GDP.