The pound dived over 1% versus the euro in the previous session as Prime Minister Boris Johnson reiterates his No trade deal threat.
The pound to euro exchange rate dropped to a nadir of €1.1706 in its second straight session of losses. This was the lowest level that the pair has traded at for 2 months.
GBP/EUR is trading down over 2% across the week.
WTO Rules
With little in the way of economic data investors will remain focused on Brexit. In the previous session, Boris Johnson said that the UK will walk away from Brexit trade talks if there has been no progress by June. This, he said, will give the UK time to focus on a hard exit on World Trade Organisation rules by the end of the year.
Boris Johnson presented his mandate for trade negotiations with the EU which are due to start next week. He decided to take this hard-line approach to prevent the EU running down the clock in trade talks until the December 31st deadline.
Boris Johnson is also refusing to publish an economic impact report of his preferred option, the Canadian trade deal. According to a 2018 government assessment, a Canadian style deal would knock 5% off economic growth across 15 years. Meanwhile a WTO exit is expected to wipe 8% off GDP growth across 15 years.
Euro Data Eyed
The euro traded on the front foot in the previous session, boosted by hopes of German fiscal stimulus and by encouraging eurozone sentiment data. Sentiment improved for the fourth consecutive month according to the European Commission’s economic sentiment indicator. The increase in morsle is in line with improved PMI’s and German IFO sentiment indicator. The data points to a bottoming out and turning around of the troubled economy. Whilstt he euro advanced its is worth noting that the data was collected before coronavirus numbers took off in China and before the Italian outbreak.
Today there is a slews of eurozone data for investors to digest including German unemployment numbers, German inflation and French GDP. Analyst are expecting upbeat data, however again this doesn’t take into account the latest coronavirus developments.