Theresa May has pushed back her Brexit deadline to the 12th March in an attempt to get fresh talks to try to get her deal through British parliament. Wednesday this week will see the British Parliament debate its approach to further talks. GBPEUR levels have risen on the news, to remain comfortably back above the 1.15 handle, presenting clients buying euros with a fresh opportunity at this higher level. The key question now is how will the pound to euro exchange rate react to the events up ahead?
Sterling is higher in value because of the increased chance of a postponement or delay to the departure date of 29th March, and the fact that this makes a no-deal less likely. Wednesday this week will see the debate of a proposal by Yvette Cooper, which would give MP’s the power to seek an extension if no-deal is agreed by March 13th. This would effectively rule out a no-deal and therefore provide some impetus for a deal to be reached, this could see the pound rising higher on the news.
GBPEUR levels could rise higher too against a weaker euro, a key piece of economic news will be released this week with the latest Eurozone Unemployment data. The euro has been under fresh pressures in 2019 as the market awaits further news over the political and economic outlook. The Italian economy has been in recession and the German economy has narrowly avoided a recession, prompting further speculation that perhaps the European Central Bank (ECB) acted in haste in December, by signaling pursuit of higher interest rates.
This week should see Brexit as the main focus which will surely signal increased volatility, as the market awaits some more definite news, rather than events simply be postponed. I expect GBPEUR will trade in the higher ranges as it appears that no-deal is once again less likely to occur. However, it does still remain on the table and a quick change in sentiment could easily see fresh uncertainty, destabilising the pound.
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