Brexit uncertainty drags down Sterling TORFX Weekly exchange rate news

Read our round up of the latest exchange rate news and plan your currency transfers for the right time.

This week’s rates

  Weekly Highs   Weekly Lows

GBP/EUR €1.1229  €1.0885

GBP/USD $1.3313  $1.2893

EUR/GBP £0.9192  £0.8905

EUR/USD $1.1904  $1.1756

The Pound to Euro (GBP/EUR) exchange rate plummeted to a six-month low today as UK-EU tensions over Brexit escalated.

Meanwhile, the Euro shot higher after the European Central Bank (ECB) played down deflation worries and upgraded growth forecasts.

What drove exchange rates this week?

The Pound (GBP) has been under pressure through the week after Downing Street announced that it is introducing an Internal Market Bill that would affect parts of the Brexit Withdrawal Agreement.

Prime Minister Boris Johnson said that the new amendments would protect the Northern Ireland peace process, while he also signalled plans to end UK-EU talks by 15th October.

However, critics of the move said that it will further damage Britain’s international standing, with ministers saying the bill breaks international law.

Ursula von der Leyen, the President of the European Commission, said:

‘Very concerned about announcements from the British government on its intentions to breach the Withdrawal Agreement. This would break international law and undermines trust.’

Meanwhile, Tuesday saw the publication of the upwardly revised Eurozone GDP figure for the second quarter, which fell by -11.8% instead of the -12.1% forecast offering the Euro support.

However, the ECB’s latest policy meeting is driving the most movement in EUR.

While the ECB kept interest on hold, President Christine Lagarde eased deflation worries and upgraded growth forecasts, expecting a less severe recession this year.

Consequently, the Euro rocketed against the Pound, and EUR/USD is rising back to near two-year highs.

The safe-haven US Dollar made gains earlier in the week in risk-off trade, but has since faced losses on improving risk-appetite, although USD/GBP is strengthening due to pessimism surrounding Brexit. 

What could move exchange rates next week?

Euro investors will be looking ahead to Monday’s release of the Eurozone’s Industrial Production figure for July. However, with the figure forecast to drop by -18.3%, we could see single currency support limited.

Meanwhile, Pound traders will be looking ahead to Tuesday’s release of the UK unemployment rate for July, with expectation a rise from 3.9% to 4.2%.

Also in focus next week will be Germany and Eurozone releases of the ZEW Survey of Economic Sentiment for September. Forecasts suggest these will sharply slow, potentially weighing on Euro exchange rates.

Thursday will also see the Bank of England (BoE) announce its interest rate decision, which is predicted to remain at 0.1%.

However, any dovishness from the BoE’s Monetary Policy Statement would drag down confidence in the British economy and weaken the GBP/EUR exchange rate.

The GBP/EUR exchange rate will likely remain volatile as Brexit developments appear to continue weighing on Sterling sentiment.

The US Dollar will continue shifting with risk appetite while the Federal Reserve’s latest rate decision could spark USD movement if it offers greater insight into its inflation framework for future policy.

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