Pound Sterling News: Pound to Euro Exchange Rate Drops -0.4% as Brexit Worries Hit Home

July 5, 2018 – Written by Toni Johnson

On Wednesday, the Pound to Euro exchange rate opened in the region of 1.1316 and closed higher around 1.1344 by the end of daily trading.

The GBP/EUR exchange rate was mainly aided by the morning’s UK services PMI, which revealed unexpected growth in June.

Chartered Institute of Procurement and Supply Group Director Duncan Brock responded to the news optimistically, saying:

‘Exceeding expectations, the [services] sector ended on a positive note at the end of the second quarter, buoyed up by the fastest rise in new orders in over a year and the strongest overall performance since last October [2017].

‘Optimism about the future remained fairly solid, possibly lifted by the effects of the warm weather.

‘So, the sector is moving in the right direction despite the background impact of Brexit still in evidence and larger corporates holding back from placing big ticket orders.’

GBP/EUR Exchange Rate News: Pound Sterling Slides as Companies Depart on Brexit Fears

The Pound (GBP) has suffered from a perfect storm of negative sentiment today, causing a clear loss against the Euro (EUR) and other currency peers.

This deterioration is down to worries about Brexit, most specifically how the Brexit deal that the UK obtains will affect conditions for businesses in the UK.

Some companies have acted prematurely today, with JP Morgan announcing plans to move staff to continental Europe and Rolls-Royce moving jet design procedures to Germany.

In the former case, Reuters reported the news as follows:

‘JPMorgan Chase & Co has asked “several dozen” employees to lead a first wave of relocations from the UK to continental Europe by early next year, as it pushes the button on plans to protect its business post-Brexit.

‘[This action] highlights the organisational and strategic challenges facing global banks as they prepare for Britain’s exit from the European Union.’

This snowballing situation of Brexit worries began with warning shots fired by car manufacturers including Jaguar Land Rover; CEO Ralf Speth cautioned that:

‘If I’m forced to go out because we don’t have the right [Brexit] deal, then we have to close plants here in the UK and it will be very, very sad.

‘This is hypothetical, and I hope it’s an option we never have to go for.’

Euro to Pound (EUR/GBP) Exchange Rate Up 0.4% as Mixed US Data Boosts Single Currency Demand

On the other side of the currency pairing, the Euro (EUR) has advanced against the Pound (GBP) today thanks to recent economic data out of the US.

The ADP employment change reading for June showed a smaller number of jobs added than forecast, while finalised composite and services PMIs have printed below expectations.

These poor results have lowered confidence among US Dollar traders and caused an increase in Euro demand.

Closer to home, the Euro has also been supported by the latest German factory orders data, which has shown a much better result than first predicted.

The reading rose from -1.6% contraction in April to 2.6% growth in May, beating the expected 1.1% printing.

Readings of factory orders in Germany have been negative since January this year, so the strong surplus figure has boosted optimism among Euro traders.

GBP/EUR Exchange Rate Forecast: Will Pound Sterling to Euro Rate Fall Further on German Industrial Data?

Unfortunately for the Pound, Friday could bring further losses in the GBP/EUR exchange rate unless there is an unexpectedly positive UK development.

The morning’s German industrial production reading is predicted to show growth in May, with a recovery shift from -1% to 0.3% on the cards.

Coming fresh on the back of today’s supportive factory orders stats, such a result could firm Euro gains against the Pound and ensure late-week GBP/EUR exchange rate losses.

The one saving grace for Pound Sterling will be Prime Minister Theresa May’s cabinet meeting at Chequers, her country retreat.

The PM is poised to unveil a ‘third option’ to resolve the Irish border issue in Brexit talks, although this has already been criticised by EU officials who have seen the plans.

Problematically, the latest leaks suggest that while the plan might be acceptable to EU officials, it could make a UK-US trade deal more difficult.

There is a lot of speculation surrounding the Chequers event at present, so it will be worth keeping an eye on the GBP/EUR exchange rate tomorrow to see if any turbulence occurs.

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TAGS: Pound Euro Forecasts