Pound to Euro Exchange Rate: Parity Possible say Deutsche

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A flash-sale of Pound Sterling characterised markets at the start of a new week in global foreign exchange as the hard-Brexit story continues to be digested. 

Sterling fell on weekend news that the UK Prime Minister would use a speech on Tuesday to argue for red-lines over EU migration and an exit from the jurisdiction from the European Courts of Justice.

Of course this means the UK will likely have to exit the single market.

The news saw the GBP/EUR exchange rate fall down to 1.1276 at one stage, however the pair has managed to recover back above 1.14.

The GBP/USD exchange rate has fallen to 1.2018, down from last week's close at 1.2196.

It had however gone as low as 1.1983 in early Pacific trade.

Oliver Harvey, Macro Strategist at Deutsche Bank believes the two exchange rates can go much lower.

In a note to clients, seen by Pound Sterling Live, Harvey offers the following analysis:

Major UK Sunday newspapers report that Tuesday’s Brexit speech by PM Theresa May will used to outline an uncompromising position including full control over immigration, sovereignty from ECJ decision-making and preparedness to exit the customs union.

In an article for the Sunday Times, Brexit minister David Davis made clear that negotiating third-country free trade deals, difficult under continued customs union membership, would be a top priority.

Davis also pointed to a transitional deal to smooth the UK’s exit, in line with recent rhetoric.

Taken together, the reports represent a high-risk strategy for the UK’s initial negotiating stance and, in our view, are consistent with the market beginning to fully price a hard Brexit.

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