Pound Euro (GBP/EUR) Exchange Rate Drops 1.5% as Brexit Deal Looks Set for Rejection

March 12, 2019 – Written by Frank Davies

Pound Sterling Euro (GBP/EUR) Exchange Rate Slumps as MPs Push Back Against Brexit Proposal

As support for Theresa May’s updated Brexit proposal proved limited this left the Pound Sterling to Euro (GBP/EUR) exchange rate under pressure.

Attorney general Geoffrey Cox’s legal opinion on the new proposals left MPs with limited incentive to support the deal, driving the Pound sharply lower across the board.

With Theresa May facing a fresh defeat on Brexit the mood towards the Pound naturally soured on Tuesday, in spite of the release of better-than-expected UK data.

Although January’s gross domestic product data showed unexpectedly strong growth on the month this was not enough to prevent the GBP/EUR exchange rate from slumping.

Brexit Deal Rejection Forecast to Drive Pound Sterling (GBP) Exchange Rates Lower

If MPs reject the updated Brexit proposal this could see the Pound losing further ground against its rivals.

A fresh defeat for Theresa May could undermine her position as prime minister, depending on the extent of the votes against her renegotiated deal.

While Parliament may still vote in favour of extending the Brexit deadline in the event of the deal being rejected this is unlikely to diminish the sense of uncertainty weighing on GBP exchange rates.

Unless markets see signs of clarity over the future of the UK’s relationship with the EU the mood towards the Pound is unlikely to improve in the near term.

Euro (EUR) Exchange Rates Vulnerable to Eurozone Industrial Production Contraction

Demand for the Euro, meanwhile, could falter on the back of Wednesday’s Eurozone industrial production figures.

If production continued to contract in January, following the lead of the weaker German data, this would give investors fresh incentive to sell out of the single currency.

Unless the Eurozone economy can demonstrate greater signs of resilience EUR exchange rates are likely to see an increased downside bias.

Another contraction in production would increase the risk of an underwhelming first quarter gross domestic product, suggesting that the Eurozone economy continued to lose momentum at the start of 2019.

Weakening House Price Balance to Add to Pound Sterling (GBP) Weakness

Thursday’s RICS house price balance could put additional pressure on the Pound, meanwhile.

As forecasts point towards a fresh deterioration in the health of the UK housing market this could dent confidence in the outlook of the wider economy.

Even if the data surprises to the upside, though, Brexit developments look set to dominate the outlook of the GBP/EUR exchange rate for some time to come.

Without signs of progress towards a mutually agreeable final deal the Pound could remain on a weaker footing throughout the week.

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TAGS: Pound Euro Forecasts