Pound to Euro outlook: ECB suggesting further monetary stimulus, where next for Sterling Euro exchange rates?

Pound to Euro outlook ECB suggesting further monetary stimulus where next for Sterling Euro exchange rates?

ECB monetary stimulus: Short term gains for the Pound vs Euro

The pound hit its highest level to buy euros in a month earlier this week. However, the pound has started to fall against the euro once again.

The European Central Bank suggested that its next move could be to either cut interest rates or re-introduce further Quantitative Easing. There was a small expectation that the ECB may have acted yesterday but the delay caused the euro to strengthen against the pound.

UK Retail Sales data also caused problems for pound to euro exchange rates. The data was the third drop in three consecutive months and this is the longest decline since 2011. This highlights the uncertainty in the economy arguably caused by the ongoing Brexit issue.

Brexit the dominant factor for GBP/EUR exchange rates

The real problem that the UK faces is that of Brexit. We did see the pound make some small gains once it was announced that Boris would become the next Prime Minister. However, the gains were short lived as the risk of a no deal Brexit still exists.

News from Europe is that the EU views Boris’ deal as ‘unacceptable’ following his first speech to UK MPs. Michel Barnier has claimed that removing the backstop was unacceptable and this is something that Boris wants to remove. Therefore, once again we appear to be hitting a stalemate with the negotiations.

The European Union has said that they will look at ‘any UK idea on withdrawal issues that are compatible with the existing withdrawal agreement.’ This suggests that the EU will be open to further discussions as long as they are not dramatically different to that already proposed.

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