Euro Pound (EUR/GBP) Exchange Rate Slides as Tory MP Defects to Liberal Democrats
UPDATE: The Euro Pound Sterling (EUR/GBP) exchange rate slipped, with the pairing currently trading at an inter-bank rate of £0.9067.
The Pound recouped this morning’s losses as UK Prime Minister Boris Johnson loses his majority in parliament.
Conservative MP Philip Lee announced he was defecting to the Liberal Democrats and dramatically left his seat among the government benches.
In a statement, he wrote:
‘The Party I joined in 1992 is not the Party I am leaving today.
‘This Conservative Government is aggressively pursuing a damaging Brexit in unprincipled ways. It is putting lives and livelihoods at risk unnecessarily and it is wantonly endangering the integrity of the United Kingdom.’
Euro Pound (EUR/GBP) Exchange Rate Left Flat as Last-Ditch Efforts by PM Unsuccessful
UPDATE: The Euro Pound Sterling (EUR/GBP) exchange rate remained muted, with the pairing currently trading at an inter-bank rate of £0.9100.
On Tuesday afternoon Sterling was able to claw back some losses as MPs moved to block a no-deal Brexit.
Reports revealed that last-ditch efforts by Prime Minister Boris Johnson to get Conservative rebels on side with the government have been unsuccessful.
The BBC’s political editor Laura Kuenssberg stated the meeting was ‘less than cordial’ and went ‘less than swimmingly’.
MPs are set to vote on whether to take control of Parliament between 21:00 and 22:000 BST.
Euro Pound (EUR/GBP) Exchange Rate Buoyed by Brexit Pessimism and Weak UK Construction
The Euro Pound Sterling (EUR/GBP) exchange rate rose, with the pairing currently trading at an inter-bank rate of £0.9125.
The single currency rose against the Pound on Tuesday as Brexit pessimism along with disappointing construction data weighed on Sterling.
Further data revealed both the Eurozone’s annual and monthly Producer Price Index (PPI) edged up by 0.2% in July.
However, a weaker Sterling allowed the pairing to rise.
Meanwhile, disappointing German data and the upcoming European Central Bank (ECB) rate decision have left the Euro under pressure against many of its peers.
UK Construction Suffers Largest Decline in New Work in a Decade
On Tuesday, data revealed the UK construction sector suffered its sharpest decline in new work since March 2009.
Added to this, business optimism sunk to its lowest level since December 2008 causing Sterling to slide.
August’s construction PMI registered at 45, down from July’s 45.3.
Commenting on this morning’s data, Group Director at the Chartered Institute of Procurement and Supply, Duncan Brock said:
‘The sector fell deeper into contraction as continuing uncertainty and a weakened UK economy took a sizeable bite out of this month’s construction activity. Inevitably business confidence followed suit, dropping like a brick to its worst since December 2008 and close to the lowest depth seen in the previous recession.
‘The reality is, if a revival of confidence and a flood of new orders return to the construction sector in the coming weeks, much like a large tanker turning in a dock, there is little room for the sector to improve in the last quarter of the year. It is likely September’s data will be even more discouraging.’
Brexit Uncertainty Causes Pound (GBP) to Sink Further
Meanwhile, the Pound continued to be hit by political turmoil on Tuesday morning causing the UK currency to sink further.
Prime Minister Boris Johnson is set to face MPs this morning after he warned of a snap general election.
The Prime Minister stated there would be an election on 14 October if MPs voted against the government.
While Johnson noted he did not want an election, progress with the European Union would be ‘impossible’ if MPs succeeded.
Commenting on the current state of the Pound, Neil Wilson of Markets.com stated:
‘Ignoring the flash crash [in 2016], we are very much in uncharted waters here. We could feasibly see $1.15 or $1.10 in the coming weeks if traders decide to move against the Pound.
‘Elections are never easy to call – the risk of Corbyn to the UK assets is probably greater than a no-deal Brexit, after all. The outlook for Sterling may well worsen if there is an election and will certainly deteriorate if it’s a no-deal.’
Euro Pound Outlook: Disappointing UK Services PMI to Weigh on GBP?
Looking ahead to Wednesday, the Pound (GBP) could slide against the Euro (EUR) following the release of the UK services PMI.
If the services sector edges closer to stagnation than forecast, Sterling sentiment will be left dampened.
While August’s German services PMI will likely to reveal weaker growth, disappointing data from the UK and ongoing Brexit pessimism could cause the Euro Pound (EUR/GBP) exchange rate to rise.