GBP/EUR Exchange Rate Firms as Merkel Sees Possible Brexit Agreement in October
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange is edging higher today in reaction to comments from German Chancellor Angela Merkel in which she suggested a Brexit agreement could be reached in October.
Brexit agreement could come in October, Germany’s Merkel says https://t.co/iPZUvg1E9J
— CNBC (@CNBC) September 25, 2018
However helping to limit any notable losses in the Euro this morning is speculation that the European Central Bank’s (ECB) next rate hike could come in September next year rather than December 2019 as previous thought.
This follows ECB President Mario Drahi’s hawkish comments on Monday, with analysts interpreting his talk of a ‘vigorous pick-up in underlying inflation’ as a signal that the bank may accelerate its monetary tightening next year.
GBP/EUR Exchange Rate Slips on Draghi Inflation Outlook
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate is back to trading close to its opening rates today, with the pairing having relinquished its early gains following Mario Draghi’s comments on inflation.
Speaking in Brussels the European Central Bank (ECB) President spoke of a ‘vigorous pick-up in underlying inflation’ while also speculating that a tightening labour market will help to bolster wage growth.
Introductory statement Mario Draghi at hearing of the Committee on Economic and Monetary Affairs of the European Parliament https://t.co/XrO2o57gXX
— European Central Bank (@ecb) September 24, 2018
While this is not expected to accelerate the ECB’s plans to raise interest rates late next year, the comments were still enough to force the GBP/EUR exchange rate to retreat.
Pound Gains 0.5% Against Euro After Brexit Secretary Calms Investors
UPDATE: The Pound is continuing to fight back against the Euro and most other peers today after its sharp losses on Friday. Investors have been reassured form some soothing words from Brexit Secretary Dominic Raab, who denied there would be an election any time soon.
Analysts, however, are not convince that the feel-good factor will last long, with today’s CBI Industrial Trends survey coming in below expectations.
GBP/EUR Exchange Rate Slumps as Brexit Talks Breakdown
After trending higher throughout most of last week’s session on the back of some strong UK inflation and retail sales figures the Pound Sterling Euro (GBP/EUR) exchange rate suffered a dramatic sell-off on Friday as the risks of a no-deal Brexit surged.
This came in the wake of a disastrous EU summit in Salzburg for Theresa May in which her Chequers plan was roundly rejected by her EU peers.
This resulted in the Prime Minister making a defiant statement later in the afternoon in which she asserted that ‘no deal is better than a bad deal’, causing GBP/EUR to rack up -1.3% of losses on the day.
Meanwhile the Euro was able to temper Sterling’s advance over the majority of last week’s session as it was lifted by broad fall in the US Dollar (USD). Any potential weakness in the single currency on the back of some lacklustre Eurozone PMI figures was masked by the collapse in GBP on Friday.
Pound Euro (GBP/EUR) Exchange Rate Begins to Rally as Raab Remains Optimistic on the Possibility of a Brexit Deal
The Pound Euro (GBP/EUR) exchange rate appears to be edging back up at the start of this week’s session, with Sterling showing signs of recovery following comments from UK Brexit minister Dominic Raab.
Speaking to Talk Radio, Raab appeared confident that the UK and EU will still reach an agreement and that a no-deal Brexit will be avoided.
‘We keep on negotiating in good faith, we try and get the best deal we can, but we are ready for all eventualities. We’ll keep negotiating in good faith. I’m confident we’ll get there.
‘These blips in the road, they’re blown a little bit out of proportion, but we double down, we don’t throw our toys out of the pram, hold our nerve, keep our cool.’
While Raab’s comments appear to have been well received by markets, it looks to be a long road to recovery for the Pound and without any solid progress in talks between the UK and EU, any gains may prove to be fleeting.
GBP/EUR Exchange Rate Outlook: Further Brexit Related Volatility Ahead?
Looking ahead to the remainder of this week’s session, with the UK data calendar looking pretty bare, movement in the Pound Euro (GBP/EUR) exchange rate is likely to continue to be dominated by Brexit sentiment.
This will in all probability prompt further volatility in Sterling, with there being significant downside risks to the UK currency if there are any more headlines indicating that a no-deal Brexit remains likely.
Meanwhile the Euro could give up some ground in the latter half of this week as economists forecast that ongoing Brexit and trade uncertainty will have dampened Eurozone business confidence this month.