Pound to Euro Exchange Rates in Final Stages of Brexit

GBPEUR Under Pressure Before Bank of England

Pound to Euro exchange rates have pushed back over 1.14 ahead of a volatile couple of weeks, with another important vote in British politics approaching. UK Prime Minister Teresa May has written to all MPs within the Conservative Party to try and rally support for her Brexit deal. A meaningful vote will be held in Parliament on the 27th February and if she is unable to find support for the existing Brexit deal then there will be another amendment put forward to be tabled by Yvette Cooper and Sir Oliver Letwin.

This amendment would see an extension of Article 50 which would mean Britain wouldn’t leave the EU on 29th March. This could potentially create more uncertainty for the pound. Whether or not this vote would prove successful remains to be seen, but it is clear that there is a great deal of uncertainty ahead for pound to Euro exchange rates with so many differing outcomes on Brexit.

EU will not re-open negotiations on the withdrawal agreement

For the time being Brexit negotiations continue to try and find an alternative to the controversial Irish backstop. However the EU insists that the withdrawal agreement cannot be re-opened and hence this still leaves the prospect of a no deal Brexit on the table. It will be interesting to see what comes out of these recent negotiations between the UK and EU. Anything positive that would give legal certainty that the backstop would be temporary could help get the deal over the line in Parliament.

Whilst the Prime Minister may lose the meaningful vote it is worth remembering that it has been enshrined in law that if no agreement is reached then the UK will be leaving on World Trade Organisation (WTO) rules. This could see considerable disruption in the short term for the British economy and for pound to Euro exchange rates.

Euro exchange rates impacted by Eurozone issues

The Euro has also been receiving a lot of attention of late with some very big changes happening to the economic picture. With Italy now officially in recession and so soon after its last recession the outlook doesn’t look optimistic, especially with Germany and France also seeing a downward trend in its growth forecasts.

Germany’s large export markets to the UK and China particularly for vehicles could see big problems for the EU’s biggest economy if trade with China slows further and if Brexit is disorderly. For the Euro the outcomes on the trade talks between the US and China and what happens with Brexit will play a major factor in the strength of Euro exchange rates.

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