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August 2019
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September 2018 GBPEUR Forecast

by Jonathan Watson | Associate Director | Foreign Currency Direct

Email: jmw@currencies.co.uk | Web: www.currencies.co.uk
Telephone: +44 (0)1494 725353 | Freephone: 0800 328 5884

September provides opportunities for answers to questions on some of the key points on Brexit and UK politics, following a brave recovery by the pound as we ended August.

Positive comments from Michel Barnier that the UK might enjoy a unique or preferred deal offered some light in the dark tunnel of a no-deal Brexit. Interbank rates on GBPEUR rose from 1.1030 to 1.114 as investors backed the potential for a better deal.

GBPEUR exchange rates had found themselves testing the lower levels of 2018 in August as increased expectations of a no-deal Brexit saw the pound sold off. Sterling briefly dipped below the significant 1.10 interbank rate before comments from the EU’s Chief Negotiator, Michel Barnier, saw the pound rise.

August saw a flurry of positive economic news including raised interest rates, a 43-year low on Unemployment and the largest government-borrowing surplus in 18 years. Strong economic performance in the past does not however overshadow the potential negative economic consequences a no-deal would have.

Once again, a major issue on GBPEUR exchange rates is not just the weak pound but also the strong Euro. Continued strong economic performance and expectations that the ECB, European Central Bank will raise interest rates in 2019 and withdraw their economic stimulus program, has all bolstered the Euro. In my personal opinion, GBPEUR is likely to now find itself back in the familiar 1.11-1.14 territory as investors back a more positive outlook but uncertainties remain.

Pound benefits from Brexit news

We know Brexit is a key driver on GBPEUR and further important news in September from the return of British MP’s following the summer recess, plus the EU Summit on the 20th  and the Conservative Party Conference on the 30th, could present some fresh direction on Brexit.

Even with Michel Barnier looking to provide the UK with a ‘special deal’, the UK still needs to agree on an overall acceptable position. Both the more soft and hard elements of Brexit must come together and ensure they do not undermine Theresa May’s position ahead of a crucial 7 months before Brexit day, 29thMarch 2019.

There appears slightly less chance of a no-deal as we enter September so, GBPEUR may find some buoyancy back over 1.10 unless a no-deal becomes more likely again, which is still very possible. Sooner or later, there will come a crunch point where not only the UK needs to understand its position but the EU will have to make some long, hard decisions about what it will really offer the UK.

The September EU Summit does not specifically list Brexit on the agenda and the October meeting is seen as a likely candidate for some substantial news. However, even Brexit Secretary Dominic Raab has been clear final talks may well run further ahead to November or December.

September provides an opportunity for more clarity on Brexit that might ultimately help the pound. Against the Euro, Sterling will continue to find a tough opponent and the potential for the Euro to retest and breach its 2018 highs against the Pound, is still a very real prospect.

More of the same in September on GBPEUR?

With no real urgency to finalise any Brexit negotiations in September, but slightly more positivity from the potential concessions available from the EU, GBPEUR could find itself back in the more familiar interbank ranges of 1.11-1.14.

Thursday 13this a very important date with lots of potential for a busy period on GBPEUR exchange rates. We have both the Bank of England and the European Central Bank interest rate decisions. Whilst no change in policy is expected, the market will be keen to understand both central bank’s assessments on recent economic news and what lies ahead for the future.

Central Bank meetings can be choppy affairs and to have two on one day, just 45 minutes away from each other, could see a volatile afternoon on GBPEUR rates. Industry-wide predications for the pound are neutral since the Bank of England raised interest rates last month. Euro strength might be the possible outcome since in recent commentary the ECB has appeared quite committed to their plans. Any deviation from this may result in Euro weakness and present a good opportunity for Euro buyers.

Conclusion

September may lack the finer details the GBPEUR pair needs for a consistent break outside the 1.10-1.155 interbank range we have occupied since September 2017, but it could deliver on enough content to ensure a volatile and shifting pattern within these ranges.

September is a very important month for GBPEUR with the double central bank meeting and the potential for progress on Brexit. If you have a transaction that you wish to consider or discuss, buying or selling Euros or pounds then please contact the author directly on jmw@currencies.co.uk

Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this article is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.

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