Sterling falls against the euro as Brexit negotiations stall
The pound to euro exchange rate has fallen below 1.1250 as political tensions in the UK over Brexit reach boiling point. Tensions are running high after the government decision to prorogue parliament was found to be unlawful. Brexit secretary Stephen Barclay is in Brussels today to meet Michel Barnier to continue discussions on the controversial Irish backstop. Media reports suggest that there is still considerable disagreement on finding a suitable solution. Rates for GBP vs EUR are likely to see a volatile few weeks ahead on the back of all the latest Brexit developments.
Those with pending requirements to either buy or sell Euros would be wise to consider their options and plan around these major developments. It is worth remembering that Britain is facing its biggest constitutional crisis for 300 years and this should not be taken lightly in the currency perspective. The single biggest driver for pound to euro exchange rates remains Brexit and the exchange rate pivots on the prospect of a deal / no deal outcome. The Bank of England was clear in its’ minutes from the last meeting and that the pound would likely weaken in a no deal scenario. Last year its forecast was more severe predicting that rates for GBP to EUR could fall to be low parity as with sterling vs dollar. With the deadline of 31st October approaching it feels that something could give at any given moment which could see considerable volatility for sterling vs euro.
Bank of England hints at interest rate cuts
Michael Saunders from the Bank of England spoke this morning hinted to further interest rate cuts whether or not there is a deal between Britain and the EU. The rhetoric is dovish and points to change of stance from the central bank. Previously the bank had signalled it may cut rates in the event of a no deal Brexit but this would suggest the outlook for the economy is more gloomy than initially anticipated.
UK data is light today so focus will move to EU consumer and business confidence numbers which may give some further clues as to how the EU bloc is performing. The data follows weak Purchasing Managers Index data this week which showed the EU economy may be stagnating.
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