Trade in the GBP/EUR exchange rate collapsed this week, with the pairing striking a new two-year low as a result of rising no-deal Brexit fears.
Pound Rocked by No-Deal Brexit Jitters
The Pound suffered a sharp sell-off at the start of this week’s session, with the GBP/EUR exchange rate plunging from €1.11 to as low as €1.08 in the span of 24 hours on rising fears the UK is headed towards a no-deal Brexit.
This came as a result of Boris Johnson’s government seeking to take a hard line stance on negotiations, with the new PM refusing to hold talks with the EU until the Irish backstop is dropped.
The GBP/EUR, then began to claw back some of this losses in the mid-week in reaction to some weak Eurozone data, namely the bloc’s latest GDP figures which revealed economic growth in the bloc halved in the second quarter.
This rebound in the Pound appeared to be short lived however, with GBP exchange rates dipping again in the tail end of the session as a result of the Bank of England’s latest policy meeting.
Whilst the BoE made no policy changes this month, Sterling sentiment soured as the bank slashed its growth forecasts and also warned of the risks posed by a no-deal Brexit.
How Will the BoE’s Rate Decision Impact the Pound Next Week?
Looking ahead to next week, the Pound to Euro exchange rate may face further volatility as a result of the ongoing deadlock between Johnson’s government and the EU, with the rising risks of a no-deal Brexit keeping the pressure on GBP exchange rates.
However, the main catalyst for movement in Sterling next week is likely to be the UK’s latest GDP figure. This may see the Pound plummet at the end of the session if growth is shown to have contracted in the second quarter as some analysts fear.
Meanwhile, the focus for EUR investors next week will be on Germany and the publication of the country’s latest industrial data.
Germany’s industrial sector has struggled in recent months, sparking concerns over the health of the Eurozone’s largest economy.
Should the latest data follow this downtrend then it’s likely we could see the Euro drift lower on fears that Germany’s economy may have contracted in the second quarter.