The GBP/EUR exchange rate remained unmoved today, with Brexit uncertainty continuing to weigh on UK markets following the Democratic Unionist Party (DUP) decision not to endorse Boris Johnson’s deal. Meanwhile, 28 MPs have refused to rule out the new deal which offers some hope for Boris Johnson and could see the deal make it through Saturday’s vote even without Irish support.
Andrew Bridgen, Tory MP and leader of the European Research Group (ERG), added that the ERG would probably back the deal, saying: “I think the vast majority of the ERG will come to the conclusion that this deal is tolerable. What we don’t want is a second referendum.”
With no UK economic data scheduled until next week, market movement in Sterling has been slow, with GBP investors sitting on their hands until Saturday’s decisive vote.
Meanwhile, doubts over the effectiveness of the European Central Bank’s (ECB) latest stimulus package have seen the euro subdued, with markets anticipating little to no perceptible effect on Eurozone inflation.
Jack Allen-Reynolds, Senior Europe Economist at Capital Economics, said: “The package is unlikely to do much good for the real economy. With short and long-term interest rates already extremely low, it does seem we are getting to the limits of what the ECB can do.”
Divisions between EU members could also be laid bare at today’s European Summit, with discussions focusing on the proposed trillion euro seven-year budget which allows farmers to challenge imports from developing countries.
This is a major source of contention among European leaders, and any signs of division during the current EU summit could weigh on the single currency.
Brexit developments will continue to drive the GBP/EUR exchange rate into the weekend with the future of Brexit hinging on Saturday’s benchmark vote.
If the Prime Minister succeeds in efforts to rally up support or brings the DUP back on-board, we could see Sterling rise at the opening of next week’s session. Otherwise the pressure will be back on the pound as markets contemplate either another extension or a no-deal outcome on 31 October.