Growing confidence that the UK will avoid a no-deal Brexit lit a fire under the Pound last week, catapulting GBP/EUR to a new 19-month high as it surged from €1.13 to just shy of €1.16.
Sterling Soars on Brexit Optimism
The Pound Euro exchange rate continued to enjoy its strong start to 2019 last week, stretching its run of gains into it fourth consecutive week as Sterling was buoyed throughout the session by positive Brexit sentiment.
However helping to spur the pairing’s early gains were some surprising strong employment figures from the UK after wage growth was shown to have climbed to 3.4% in November.
These gains were then kicked into high gear on Thursday evening, with GBP/EUR striking a 19-month high on reports the Democratic Unionist Party (DUP) was prepared to conditionally back Theresa May’s Brexit ‘Plan B’.
Meanwhile the Euro was unable to put up much of a fight last week as the European Central Bank (ECB) held its first policy meeting of 2019, with EUR softening as ECB President Mario Draghi acknowledged that downside risks to the Eurozone have grown.
This followed the release of the Eurozone’s latest PMI figure, which revealed the bloc’s private sector only narrowly avoided stagnation in January.
GBP/EUR Exchange Rate Outlook Dominated by ‘Plan B’ Debate
If there was ever any doubt that Brexit has adopted the plot from Groundhog Day, this week will again see a parliamentary debate on Theresa May’s Brexit deal as the main catalyst of movement in the Pound to Euro exchange rate…
The PM will be hoping that a vote on her ‘Plan B’ deal will go a little differently this time around however as MPs seek to avoid inadvertently slipping into a no-deal Brexit.
This is likely to result in Sterling strengthening if the deal passes outright, or if it is pushed through with a cross-party amendment attached that blocks a no-deal Brexit and potentially forces the government to extend Article 50.
Meanwhile the focus for EUR investors next week is likely to be on the Eurozone’s latest GDP estimate, with the Euro likely to face significant headwinds if growth in the block slowed in the fourth quarter as recent data might suggest.