GBP/EUR Weekly Outlook 25th - 29th March 2019

Good afternoon everyone.

Another volatile week is expected for Sterling with a possible 3rd vote on the cards but no date officially confirmed yet. EU leaders last week offered an unconditional two-week extension to Article 50, delaying Brexit to 12th April. By that date, the UK’s options are to pass the EU Withdrawal Agreement and leave on the 22nd of May, leave immediately with no deal or ask for longer delay to chart a new course.

At the time of writing, there’s no definite date for another vote on the deal however rumours are that PM May briefed her party this morning and that a vote could happen as soon as Tuesday or Wednesday. If it eventually gets passed, EU leaders at last week’s EU summit in Brussels agreed to extend Article 50 until 22nd May. That’s just a day before elections to the European Parliament scheduled to take place between 23rd and 26th May, and it provides time for the deal to be ratified enabling an orderly UK withdrawal from the EU. But if, for whatever reason, the deal is not passed then there will be an unconditional extension to Article 50 until 12th April offered by EU leaders last week. By then, the UK will need to have decided whether to leave the EU with no deal or to take part in European elections and accept a long delay to Brexit in order to chart a new way forward (indicative votes among MPs and/or a second referendum). Additionally, the UK can revoke Article 50 at any time and there is also a risk of a new general election.

The week ahead……

PM May’s 3rd attempt at getting her deal through the House of Commons will be where most focus is and earlier this afternoon we’ve heard news from ITV that a 3rd meaningful vote could happen as soon as tomorrow. As there’s been no mention of changes to her deal we now have to wait to hear from the Speaker Mr Berkow to see if he’ll grant her the vote that he stopped from happening last week. Separately, there are reports that May will talk with the DUP over the phone today to update them on negotiations. With a deal now looking likely to happen this week I think we can make the following assumptions based on what we’ve seen recently.

If she gets her deal passed by Parliament then this should be positive for the GBP/EUR exchange rate. Another big defeat will again weaken the GBP/EUR rate but a small lose may be seen as a step closer to getting her deal through. Upon news breaking of another vote Sterling exchanges rates all went from been in the red to back in the green and heading towards Fridays highs of €1.17+. Another good example of how Brexit is making the exchange rate so volatile.

Economic data this week will have some focus on it but market movements may be reduced due to focus on Brexit and the possible 3rd vote. Wednesday and Friday look to be the key days for economic data.

GBP/EUR & EUR/GBP Weekly Movements

With market sentiment for GBP/EUR rate so volatile at the moment typical trends we’re use to seeing are changing by the hour. Thanks to the news coming from ITV, Sterling exchange rates are holding on to most of its gains from last week.  Current key trading level is now around the €1.1660’s. If we see the rate move LOWER than this level for a sustained amount of time, then the likelihood of the rate moving into the high €1.1630s will be high. As with such high volatile times the rate could easily move up HIGHER on the back of an unexpected Brexit updates and if we see the rate move above €1.17’s for a sustained amount of time then we could see it push towards the €1.1770’s. It should be noted that on two occasions now over 2 weeks ago the rate pushed towards the €1.18’s but failed to push higher. Anyone hoping to achieve €1.18+ will need to keep in mind that the best chance of seeing this happen will be PM May getting her deal through the House of commons. This is in my eyes is the best case scenario for Sterling exchange rates and anything else won’t have as positive affect.

Low Risk takers with pending exchanges that need to be made this week, should consider making their exchange while the interbank rate is above or close to the €1.17’s. Although markets are still optimistic that something will be agreed before April 12th, this doesn’t mean it will 100% happen and the alternatives are still lacking clarity.

Medium Risk takers with pending exchanges that need to be made this week, (same as above) should consider making their exchange while the interbank rate is above or close to the €1.17’s. As mentioned before, with no changes to her deal, the likelihood of it gathering enough votes is still small however with time running out and I’m sure some MP’s will feel they have to back it or risk been blamed for a No Deal Brexit.

High Risk takers with pending exchanges that need to be made this week, could hold off to see how PM May’s 3rd attempt of getting her deal through the house of commons goes. There was a number of MP’s suggesting they would now get behind her on the 3rd attempt but could still leave her a little short of the required majority. I think a close loss on her deal may not weaken Sterling exchanges rates as much as we’ve seen in the past as it does mean she’s getting closer.

Key Economic Data and Events

Monday, March 25th

09:00 EUR German IFO Business Climate (MAR)

09:00 EUR German IFO Expectations (MAR)

09:00 EUR German IFO Current Assessment (MAR)

Tuesday, March 26th

07:00 EUR German GfK Consumer Confidence (APR)

07:45 EUR French Gross Domestic Product (YoY) (4Q F)

09:30 GBP BBA Loans for House Purchase (FEB)

Wednesday, March 27th

08:00 EUR ECB President Mario Draghi Speaks in Frankfurt

Thursday, March 28th

00:00 GBP Nationwide House Px n.s.a. (YoY) (MAR)

13:00 EUR German Consumer Price Index (MoM) (MAR)

Friday, March 29th

00:01 GBP GfK Consumer Confidence (MAR)

07:00 EUR German Retail Sales (FEB)

08:55 EUR German Unemployment Claims Rate (MAR)

09:30 GBP Consumer Credit/lending (FEB)

09:30 GBP Mortgage Approvals (FEB)

09:30 GBP Gross Domestic Product

 

Red = Major market effect, Orange = Medium market effect & Green = little market effect.

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