The EUR has seen its value fall against the Pound in recent days, with GBP/EUR rates trading back above 1.14. These are some of the lowest levels the Euro has traded at in recent months and this fall comes despite the on-going uncertainty surrounding the UK ‘s impending Brexit.
Last week only compounded the issue, with UK Prime Minister Theresa may losing a key Commons vote on her Brexit deal and subsequently just survived a vote of no confidence in her leadership. She now faces the prospect of trying to negotiate further with Brussels, in order for her to go back to her fellow MP’s with an improved deal, which she can then hopefully push over the line before the UK’s deadline to leave the EU on March 29th.
Whilst this uncertainty is likely to handicap any major advances for Sterling for the time being, I think it is poignant that the Euro failed to make any further inroads against the Pound, despite the issues mentioned. They could hardly be seen as positive for the UK and ultimately they were unlikely to boost invvetsors longer-term confidence in GBP.
It is more likely that investors had significantly factored din the negative outcomes and thus, the Euro had no further scope for improvement when the outcomes were so heavily predicted. It may be that the EUR has gone as far as it can under the current market conditions and in my opinion only the prospect of a no-deal scenario for the UK when it does exit the single bloc, could act as the catalyst to drive GBP/EUR rates back towards and possibly under 1.10.
Looking ahead and the Eurozone economy is to see its economic output slow this year, with political and economic problems in key Eurozone economies such as Germany and France weighing heavily on the region’s growth.
The Eurozone will also have to cope with the loss of an integral member, when the UK does finally depart and I believe these factors will impact the EUR value over the coming months.
