The pound to euro exchange rate stands at 1.1260 today at the time of writing. This is -0.97% below sterling’s recent four-month high against the common currency, its strongest since mid-May, reached last Friday September 20th, of 1.1371.
Confidence on Brexit deal knocked: How is British politics affecting GBP/EUR exchange rates
In part, the pound has weakened, because the financial markets are no longer so confident that the UK and the EU will agree a Brexit deal in the foreseeable future. To explain, yesterday Parliament returned to session following the Supreme Court’s ruling earlier this week that Prime Minister (PM) Boris Johnson’s decision to prorogue Parliament is unlawful. The atmosphere in the House of Commons was arguably antagonistic, as opposition MPs refused to allow the House of Commons to go to recess, so that the Conservative Party could hold its annual conference, and the PM remained ambiguous about his Brexit strategy.
At one point, Labour MP Ian Murray asked Mr. Johnson “If he doesn’t get a deal through this House, or a ‘no deal’ through this House, by 19 October, will he seek an extension from the EU to 31 January?” This would be to comply with opposition MPs’ law, the Benn Act, which legally obligates the PM to request to further extend the UK’s Brexit deadline, beyond its current limit of October 31st. Yet Mr. Johnson replied “No”, which is to say that he won’t request another extension to Article 50, yet he added that he won’t break the law either.
So this suggests that Mr. Johnson and his minority Conservative government are seeking a legal loophole, to avoid complying with the Benn Act, without technically breaking the law. This could lead MPs to feel even more suspicious toward Mr. Johnson, given the Supreme Court’s ruling that the PM broke the law by suspending Parliament. Any extension to the Brexit deadline has historically supported GBP/EUR exchange rates and the possibility of a no deal has negatively impacted sterling’s value. Also, Mr. Johnson’s ambiguity leaves the conclusion of Brexit in limbo causing volatility for pound to euro exchange rates.
Eurozone consumer confidence, economic sentiment data due
Looking to tomorrow, the European Commission (EC) will release September’s consumer confidence and economic sentiment data for the Eurozone. These are forecast to show that Eurozone households and businesses feel more pessimistic this month compared to August, perhaps reflecting the accelerating economic slowdown, and the United States’ and China’s trade war. These releases may affect the value of sterling versus the euro, alongside Brexit.
If you would like to learn more about factors influencing GBP/EUR rates or have an upcoming currency transfer, feel free to contact our team.