Pound to Euro Forecast – Brexit Extended

How could an extension to Brexit affect the Pound to Euro forecast?

The Pound to Euro exchange rate has made some small gains following the latest Brexit developments from Brussels last night. The GBP to EUR rate is moving higher towards 1.16 for the pair after the EU agreed to delay the Brexit deadline until the 22nd May on the condition that Theresa May is able to find support for her Brexit deal in the House of Commons. If not then the Britain will leave the EU on the 12th April although it appears there may be a way of extending that date further with the UK participating in European elections if required.

For those thinking that Brexit was almost over, it is clearly not, with a number of weeks to go before a decision has to be made. A meaningful vote is expected to go ahead next week but at the moment it seems difficult to see the arithmetic in the House of Commons working for the Prime Minister. In fact French President Emmanuel Macron put the chances of Theresa May winning the vote at just 5%. Whilst a number of MPs from the European Research Group have signaled they will not vote for the deal, as have some prominent “remainers” including Dominic Grieve. If the deal is passed then there is likely to be a good opportunity for buying Euros although at this stage everything hangs in the balance.

The same different scenarios remain including the prospect of a no deal Brexit which is still the legal default position if a deal cannot be reached. Rates for GBP to EUR should finish the week with high volatility as the markets try and guess the final outcome of Brexit and politicians give their differing views on the matter.

There are likely to be some substantial currency movements for GBP vs EUR in the coming week and it would be sensible to plan around these key events. Expect a heavy round of interviews with the political heavy weights over the weekend which should offer clues as to where all of this is heading.

Bank of England hold interest rates

The Bank of England met yesterday and held interest rates at 0.75% as widely expected. The outlook from the Bank of England for the UK now very much depends on the outcome and timing on Britain’s withdrawal from the EU. Governor Mark Carney reiterated that no deal would result in no transition period which would cause a negative shock to the British economy. However it has also been reported that gagging orders have been placed on businesses with regards no deal planning highlighting just how close the country is to a no deal Brexit.

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