EURGBP Brexit extended as Eurozone PMIs raise recession concerns

The EUR/GBP has been on a rollercoaster ride over the past couple of weeks as market participants reacted to the latest Brexit headlines while keeping a close eye on a deteriorating Eurozone economy. The Chunnel’s volatility spiked further since last night, as the pound initially rose on the back of news the EU made a conditional agreement to extend Brexit, while the single currency slumped on the back of very poor flash Purchasing Manager Index (PMI) data from the Eurozone’s largest economies this morning. The losses for the EUR/GBP has been somewhat contained as the GBP/USD has also fallen back this morning alongside the EUR/USD, although to a lesser degree.

Eurozone PMIs sink

German Manufacturing PMI 44.7 vs. 48.0 expected and 47.6 last
German Services PMI 54.9 vs. 54.8 expected and 55.3 last
French Manufacturing PMI 49.8 vs. 51.4 expected and 51.5 last
French Services PMI 48.7 vs. 50.6 expected and 50.2 last
For the Eurozone as a whole:
Manufacturing PMI 47.6 vs 49.5 expected and 49.3 last
Services PMI 52.7 as expected and 52.8 last

The PMI numbers are leading indicators of economic health. As businesses react quickly to changing market conditions, it is reasonable to expect purchasing managers to hold the most current insight from the companies’ point of view of the economy. So, the fact that they reported sharply deteriorating conditions for March is not a good sign. In fact, these numbers are recessionary.

Brexit extended

The UK was meant to officially leave the EU with or without a deal next Friday, March 29. But the deadlock in parliament meant an extension was required. The EU agreed to delay the Brexit date until 22 May but only if Theresa May's deal is approved by MPs in the next week. However, if parliament rejects May's deal yet again, then the UK will have a shorter delay of April 12, by which date it must tell the EU what it wants to do next.

A third rejection of May’s divorce bill would further raise the prospects of a no-deal Brexit, which could be pound-negative. As such, the losses for the EUR/GBP could be limited in the short-term outlook. But if May’s deal is passed at the third time of asking, and the UK eventually does leave the EU with a deal, then we think this pair could fall a lot further over time.

Source: TradingView and FOREX.com.

The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.

Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.

Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.

The products and services available to you at FOREX.com will depend on your location and on which of its regulated entities holds your account.

FOREX.com is a trading name of GAIN Global Markets Inc. which is authorized and regulated by the Cayman Islands Monetary Authority under the Securities Investment Business Law of the Cayman Islands (as revised) with License number 25033.

FOREX.com may, from time to time, offer payment processing services with respect to card deposits through StoneX Financial Ltd, Moor House First Floor, 120 London Wall, London, EC2Y 5ET.

GAIN Global Markets Inc. has its principal place of business at 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA., and is a wholly-owned subsidiary of StoneX Group Inc.