Published On: Sun, Aug 11th, 2019

Pound euro exchange rate sinks as UK economy contracts over Brexit uncertainty | City & Business | Finance

As a result, Sterling traders have become increasingly jittery today, with fears of an imminent UK recession becoming more likely. Nancy Curtin, a Chief Investment Officer at Close Brothers Asset Management, said: “There’s no denying that the UK’s GDP figures are a cause for concern. “We are likely to see a similar phenomenon ahead of October, as firms look to mitigate supply chain disruption in the case of a no-deal Brexit, which may provide short-term support for GDP.” No-deal Brexit fears also continued to rise today, following comments from Labour leader Jeremy Corbyn, who accused Prime Minister Boris Johnson of plotting to force a no-deal on October 31. 

Meanwhile, the euro edged higher against the pound despite this morning’s German trade balance figures for June, which showed a worse-than-expected surplus of €16.8 billion. 

Month-on-month German exports in June also contracted -0.1 percent following growth of 1.3 percent the previous month. 

Euro traders are increasingly concerned about the likelihood of a contraction in the Eurozone’s economy in the second quarter. 

Carsten Brzeski, a Chief Economist at ING, said: “[T]he outlook for German exporters is clearly in the hands of the US and China.

“Not only regarding the ongoing conflict but also regarding a possible conflict between the US and the EU, with President Trump already joking about tariffs on cars, and future trends in the Chinese market for automotives.”

We could see the single currency struggling into next week as the Eurozone’s ongoing economic woes weigh on market sentiment. 

The GBP/EUR exchange rate will continue to remain volatile with no-deal Brexit fears increasing and UK-EU relations showing no let-up over the controversial Irish backstop.

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