Pound euro exchange rate lifted as EU offers a lifeline to Brexit negotiations
Philip McHugh October 24th 2018 - 2 minute read
The pound edged higher yesterday as investors hoped an offer from the EU regarding a potential customs union with the UK could lead to a breakthrough in Brexit talks.
Sterling is dragging its heels again this morning however, with GBP/EUR muted at €1.1309, GBP/USD dipping to $1.2955 and GBP/CAD sliding to C$1.6946, while GBP/AUD and GBP/NZD both retreat, striking AU$1.8248 and NZ$1.9752 respectively.
Looking ahead, the euro will be in the spotlight this morning, with the single currency facing potential losses if the Eurozone’s PMI figures print in line with expectations.
What’s been happening?
The pound edged higher yesterday, with reports that the EU may offer a UK-wide customs union, allowing the UK currency to shake off some of its recent Brexit anxiety and recoup some of Monday’s losses.
It’s hoped that the offer will help Theresa May sidestep the issue of an Irish backstop and help get Brexit negotiations back on track.
However Sterling’s rally appeared to be limited in nature, with markets fearing it could prove a difficult pill to swallow for many Conservative Brexiteers.
Also helping to give the pound a leg up against the euro yesterday was the European Commission’s formal rejection of Italy’s 2019 budget, with the GBP/EUR exchange rate accelerating amid fears this could spark tensions between Rome and Brussels.
Consequently the Italian budget jitters led to the GBP/USD exchange rate remaining rangebound throughout Tuesday’s session, with the resulting political uncertainty fueling demand for safe-haven currencies such as the US dollar.
What’s coming up?
The euro may face further pressure this morning as well, with the release of the Eurozone’s latest PMI figures forecast to show that the slowdown in the bloc’s private sector continued through October.
Meanwhile the pound may struggle to build on Tuesday’s gains today, with the UK’s latest mortgage figures predicted to reveal that home loan approvals fell in September as the Bank of England’s latest rate hike came into effect.
Finally the release of the latest US new home sales figures could bolster the US dollar this afternoon if sales remain robust in September as expected.