The GBP/EUR exchange rate suffered a staggering sell-off this week, plunging to its lowest levels since March, in response to the accelerating risks of a no-deal Brexit.
Pound Nosedives amid Fresh Brexit Crisis
The Pound fell off a cliff this week, suffering its worst one-week decline since the height of the coronavirus crisis amidst a stark rise in concerns that the UK is hurtling towards a no-deal Brexit.
This was triggered by the UK government’s proposal of its internal market bill, which would ‘break international law’, by overriding parts of the EU withdrawal agreement.
This unsurprisingly triggered an angry response from the EU, which accused the UK of ‘seriously damaging trust’ between the two sides and resulted in the EU threatening legal action and trade sanctions should the bill not be amended.
The Euro, meanwhile was catapulted higher this week on the back of the European Central Bank’s (ECB), latest policy decision.
EUR investors welcomed the ECB’s decision to leave rates on hold as well as the bank’s more upbeat growth forecasts for 2020, but it was President Christine Lagarde dismal of concerns over the strength of the Euro which really lit a fire under the single currency.
BoE in the Spotlight Next Week
Turning to next week, it will be the turn of the Bank of England (BoE) to take centre stage as it delivers its September policy decision.
Much like the ECB, the BoE is expected to leave its monetary policy untouched this month. However GBP investors will be keeping a close eye on the bank’s forward guidance, as they continue to look for any insight into the bank’s potential plans for negative interest rates.
There will also be a slew of high impact GBP data releases which could influence Sterling sentiment next week, although the spectre of Brexit is likely to continue to cast a long shadow, likely limiting any upside potential in the Pound.
Across the channel the focus at the start of this week will be on the latest ZEW economic surveys, with the Euro likely to give some ground if economic sentiment weakened this month.
The remainder of the week could then see the focus turn back to Europe’s coronavirus resurgence, with the single currency potentially facing additional pressure if cases continue to rise at an alarming rate.