Pound to Euro Forecast : Sterling falls on Backstop pledge

Pound to Euro Forecast – The Pound has been falling throughout trading today, following a debate yesterday evening between the Conservative leadership candidates. Both Boris Johnson and Jeremy Hunt have hardened their position on Brexit. They’ve said the backstop needs to be removed completely. Markets had thought that the EU could amend the wording, perhaps putting a time limit on the Backstop in the hope this would be agreed by MPs. Their comments effectively rule this out.

The EU have said they will not renegotiate, so these developments increase the likelihood of the UK leaving without a deal in October. Of course, this could just be an attempt to bluff the EU into entering negotiations. However it’s also possible they could call our bluff, and it’s this fear that has driven the Pound lower today.

Pound to Euro Forecast – GBP/EUR falls to new 6 month lows

GBP/EUR 2 months

GBP/EUR rates have fallen by more than 6% in the last few months as the chart above shows. Today the pair has fallen to fresh 6 month lows. The mid-market level is at €1.1070 at the time of writing. Pound/Dollar rates are even lower, trading at the lowest in more than 2 years at $1.24.

Economy performing well, Pound falls anyway

Today’s economic data from the UK was actually positive, with wage growth better than expected at 3.4%, and the overall jobless rate remaining at a record low of 3.8%. The Pound fell regardless, as Brexit is seen as the dominating factor for Sterling.

Could the Pound fall further?

If the new Prime Minister continues this approach once in office, markets could continue to price in an increased chance of a disorderly Brexit. In turn, this increases the chances of an interest rate cut later this year. This could cause the Pound to fall further in the coming months.

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