Pound to Euro forecast: No Deal planning sparks volatility for GBP/EUR exchange rates

Pound to Euro forecast No Deal planning sparks volatility for GBPEUR exchange rates

Pound to Euro rates remain at lows

The pound to euro exchange rate is making a small recovery this morning with interbank rates for GBP/EUR pushing above 1.0860 for the pair after sharp falls seen yesterday. This is despite reports that have emerged this morning that the EU has completed the vast majority of its no deal planning as it views a no deal Brexit a likely option. The Bank of England in its forecasts last year predicted rates below parity for GBP to EUR as well as GBP vs USD highlighting a very negative impact on the price of sterling as a result of a no deal Brexit.

‘No Deal can no longer be blocked,’ says Dominic Cummings: How might this affect GBP/EUR exchange rates?

With parliament in the UK still gridlocked over whether a no deal is even possible the markets are reacting on any news developments surrounding Brexit. Only yesterday the health secretary Matt Hancock repeated comments from Dominic Cummings, the senior aide to the Prime Minister, that a ‘no deal’ can no longer be blocked by MP’s. Questions also remain over whether there could be a general election in the UK, something that also could lead to heightened volatility for the pound to euro exchange rates. With British and EU talks on Brexit on ice until some ground is given on the contentious Irish backstop there is a growing chance that a no deal Brexit which is deemed negative for sterling exchange rates will take place.

The economic data from the UK looked brighter yesterday after UK services Purchasing Managers Index released yesterday touched a 9 month high with a reading of 51.4 having moved higher to 50.2. Anything above 50 represents expansion in the sector and show that the engine room of the British economy is still expanding despite the global growth concerns and ongoing Brexit uncertainty.

ECB looking to cut interest rates to a record low?

Meanwhile in the EU there is an expectation that the ECB will look to cut interest rates to fight off any economic slowdown. Interest rates may fall to a record low of -0.6% which would signal deep concern by the central bank of economic troubles to come. It has been reported by Goldman Sachs that a number of European banks could be hit hard by the reduction in rates with some just breaking even or even loss making.

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