GBP/EUR Exchange Rate Improves Following ‘Constructive’ Brexit Negotiations
The Pound Euro (GBP/EUR) exchange rate has been volatile this morning, with the pairing currently trading around €1.134.
Brexit Secretary Stephen Barclay is set to begin talks with the EU’s Chief Negotiator, Michel Barnier which will follow on from yesterday’s unexpectedly “constructive” meeting between Prime Minister Boris Johnson and Irish Taoiseach Leo Varadkar.
Optimism over the possibility of an emerging deal with the EU saw Sterling rise against the Euro on renewed hopes of a possible breakthrough before the crunch EU summit next week. However, UK markets were simultaneously cautious after Mr Varadkar warned of significant challenges and the risk of “many a slip between cup and lip”.
Brexiter Tory MP Nigel Evans commented:
‘I believe it is three dimensional poker and we’re playing very high risk stakes here… But at the end of the day, I think there’s a realisation by the European Union that Boris Johnson, completely different to [former PM] Theresa May, is prepared to leave the European Union on October 31, unlike the March 29 deadline which was movable.’
With no UK economic data due until next week, Brexit developments will dominate headlines today, with any further news that a deal might be on the table certain to boost the GBP/EUR exchange rate.
EUR/GBP Exchange Rate Sinks on ECB Policymaker Rift
The Euro (EUR) fell against the Pound (GBP) following confused opinions from the European Central Bank’s (ECB) policymakers over the use of Quantitative Easing.
Carsten Brzeski, Chief Economist at ING, commented:
‘It is not the first time in ECB history that there have been dissenting voices in the Governing Council, but they have rarely been as loud and persistent as they are now.’
German inflation figures confirmed expectations today, with the year-on-year figure holding at 0.9%. This failed to bolster the Euro and did little to alleviate growing concerns for an imminent German recession which analysts perceive as a significant threat to the rest of the European economy.
GBP/EUR Outlook: Could Sterling Rise Higher on UK-EU Brexit Deal Compromise?
Euro traders will be looking ahead to Monday’s Eurozone industrial production figure for August, which is expected to improve from -0.4% to 0.2% on the month. As a result, we could see the single currency edge higher on renewed hopes for an economic recovery.
Tuesday’s UK average earnings figures for August could provide some support for Sterling as economists forecast an improvement from 3.8% to 3.9. This will be followed by the UK ILO unemployment rate for August, which is expected to ease.
Brexit developments will remain a dominant driver behind the GBP/EUR exchange rate next week, with any indication of a UK-EU compromise reducing fears for a no-deal on October 31 and offering a much needed boost to Sterling.