Brexit uncertainty propels GBP/EUR to €1.09

The pound slumped on Monday, with Brexit uncertainty and speculation the Bank of England (BoE) may target negative interest rates weighing on the currency.

Sterling remains muted so far this morning, with GBP/EUR sliding to €1.0947 and GBP/USD subdued at $1.2271. GBP/CAD is rangebound at C$1.6794, while GBP/AUD and GBP/NZD hold steady at AU$1.7905 and NZ$1.9164 respectively.

Coming up today, will a speech by Boris Johnson outlining his plan for post-lockdown economic recovery offer some support to GBP exchange rates today?

What’s been happening?

The pound opened this week’s session on the back foot, retreating in response to renewed Brexit jitters.

This came as a month of ‘intensive’ trade talks between the UK and EU got underway in Brussels, with GBP pessimistic on the chances of a breakthrough, despite recent optimism from Boris Johnson.

Further weighing on Sterling sentiment were comments from the Bank of England policy maker Gertjan Vlieghe, who suggested the BoE may move to slash interest rates again in the future.

The euro, meanwhile, struck higher on Monday as the appeal of the single currency was bolstered by upbeat data, with both Eurozone economic sentiment and German inflation improving in June.

Finally, in the face of growing concerns over a second wave of coronavirus infections as US cases continued to spike, the US dollar struck higher yesterday as investors favoured the safe-haven currency.

What’s coming up?

Looking ahead to today’s session, the focus looks to be on a speech by Prime Minister Boris Johnson as he sets out his plans on how he will revive the economy.

Johnson is expected to announce plans to invest billions of pounds in infrastructure, education and technology in an effort to help kick start the post-lockdown economy.

Should his proposals be welcomed by markets then we may see the pound mount a comeback today.

For EUR investors the focus this morning will be on the Eurozone’s CPI release, with the euro likely to strengthen if the bloc managed to avoid another month of deflation in June.

Meanwhile, the US dollar is likely to remain well supported through today’s session so long as coronavirus concerns continue to hang over markets.