Euro rate forecast: How ‘no deal’ could affect GBP and EUR

Pound to Euro Exchange Rate: Economic Impact of Coronavirus to be Under Watch This Week

In today’s Euro rate forecast, I examine how, as the three-year long Brexit fiasco finally comes to an end, the messy divorce with the European Union is now showing its effects on the complacent currency markets. As per the current market readings, the exchange rate is quite tranquil.

There is one currency that could take a severe beating if a no-deal Brexit is finalized. That is not the Pound Sterling, but actually the Euro. As is the case, the sensitivity of Pound Sterling to the Brexit negotiations is common knowledge, and it is touted as an unofficial opposition to a popularized hard Brexit.

On the other hand, a no-deal Brexit would further sink the EUR into a mire of its own problems. Currently under 1.10 against the US Dollar, the Euro has started to show signs of renewed weakness, courtesy of the European Central Bank (ECB).

A dire global trade environment is on the cards, something that puts Germany in a precarious position at the same time. Brexit affects the Euro significantly, and incidentally, it also affects businesses and trading activities in the Eurozone too.

According to some experts, the European markets may unknowingly creep towards an imminent fall. Interestingly, if the EU and UK fail to be on the same page at the end of January 31, it could wreak havoc for both the UK and EU, as the stock market could fall significantly, and its shock waves would resonate all across the European landscape.

In a worst-case scenario, if a no-deal Brexit comes into effect, it will shatter the Euro’s current standing and sink it further to 1.05 against the US Dollar. However, this wouldn’t be the end, as there would be more room for further price falls after the initial shock was done and dusted.

Euro predictions: Agreeing a deal is in both UK/EU interests

This potentially mutual detriment for the EU and the UK could actually be a blessing in disguise, as both sides are forced to find an answer, to avoid a market meltdown. The recent mini-crisis in Italian bonds and the Greek debt crisis are clear signs that EU is willing to negotiate, provided that the terms are favourable.

For more information on what could impact your GBP/EUR transfer in the coming weeks, get in touch with me directly, Daniel Johnson at dcj@currencies.co.uk, or speak with a member of our team on +44 (0)1494 292 675.