Home EUR GBP/EUR: Pound Pares Gains As Brexit Uncertainty Continues

GBP/EUR: Pound Pares Gains As Brexit Uncertainty Continues

21st October 2019

Brexit optimism boosted the pound across the previous week. The pound euro exchange rate rallied 1.3% Monday through to Friday, hitting a 5-month high of €1.1660. The pound has advanced just shy of 3% versus the euro so far this month. The pair is losing ground in early trade on Monday, dropping back below US$1.16.

The pound has soared over recent weeks as investors became increasingly confident of a Brexit deal between the UK and the EU. A deal was agreed on Thursday, sending the pound to a 5-month high. Doubts surfaced over whether Parliament would agree to the deal.

This weekend, Parliament frustrated Brexit plans by withholding approval to the Brexiit deal until formal ratification legislation is passed. Even so, the UK government insists that the UK will still leave the EU on 31^st October.

Analysts broadly agree that the latest developments make a no deal Brexit less likely. That said, the recent euphoria of a Brexit deal has also declined, with an extension until 31^st January also possible. As a result, the pound has given back some gains at the start of the new week. However, given that the probability of a no deal Brexit has declined, analysts expect the pound to hold onto the bulk of its recent gains.

Brexit developments will be the exclusive driver of the pound as the new week begins.

*Advertisment

Euro Investors Look To Thursday’s ECB Rate Decision

The euro was also broadly in favour across the previous week, albeit less so that the pound. The euro advanced as the probability of a Brexit deal also boosted the common currency. This is because eurozone economies wold also benefit from a Brexit deal as it would reduce uncertainty and risk.
Last week was a quiet week as far as the euozone economic calendar was concerned. The the start if this week, the eurozone economic calendar is still quiet. The principal focus will be pmi readings on Thursday. The same day the European Central Bank will make its monetary policy announcement. In September the ECB cut its overnight interest rate and restarted its bond buying programme. Any hints from ECB President Draghi that the central bank is prepared to continue easing could drag on the euro.

What do these figures mean?

When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.13990 EUR

Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound.

Or, if you were looking at it the other way around:

1 EUR = 0.87271 GBP

In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.