If you’re looking for a Euro Pound forecast, it may interest you to know that the Pound has fallen today, as Michel Barnier, the EU’s Chief Brexit Negotiator, said that the papers provided by the UK two days ago had taken negotiations backwards.
Further pressure was added when Simon Coveney, the Irish Foreign Minister, noted the grave difficulties caused by UK Prime Minister Boris Johnson’s change in approach. Sterling is now trading more than -0.5% below the GBP/EUR four-month high reached on Friday afternoon.
Euro predictions: Chance of ‘no deal’ Brexit still deemed low
Despite this setback, the probability of leaving the EU without a deal is still deemed relatively low. This is particularly following the passing of anti-deal legislation in the House of Commons earlier this month, which was supported by a group of cross-party MPs. The legislation forces the Prime Minister to request a three-month extension to Article 50, should the UK not have a deal in place with the EU by 19 October.
However, Boris Johnson has promised to leave the EU with or without a deal on 31 October. So his “do or die” position puts him at odds with the latest legislation, and he’s now under enormous pressure to get a deal. In addition, the EU is not obliged to grant an extension, so ‘no deal’ is technically the default position right now.
Germany posts largest industrial contraction since June 2009
Elsewhere, the Eurozone’s largest economy, Germany, has reported its largest contraction in industrial activity since June 2009. IHS Markit reported a figure of 41.4, where a figure of 50 is required for expansion. This significantly increases the already high probability that the German economy is about to enter recession.
This has partly been apportioned to fears over Brexit, but this can be largely blamed on the global economic slowdown and the ongoing US/China trade tensions. German business confidence is now at its lowest since 2012.
Weak Eurozone data will weaken the Euro, but there’s no doubt that the main driving force behind the GBP/EUR currency pair will continue to be Brexit. With the Supreme Court about to rule on whether Boris Johnson’s proroguing Parliament is legal, GBP/EUR could be in for another bumpy week.
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