GBP/EUR Exchange Rate Buoyed by Brexit Optimism
The Pound to Euro (GBP/EUR) exchange rate is threating to push above €1.15 this morning amidst renewed hopes that a Brexit deal could be finalised this week.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1485, up roughly 0.4% from this morning’s opening levels.
Pound (GBP) Surges on Barnier’s Brexit Comments
The Pound (GBP) is back on the front foot this morning as comments by the EU’s chief Brexit negotiator Michel Barnier triggered a fresh bout of GBP buying.
In an update to EU ministers in Luxembourg this morning, Barnier suggested that while it would be ‘difficult’ it is still possible for a deal to be struck this week.
Brexit: Barnier says deal will be 'difficult' but is 'still possible this week' – live news https://t.co/fbwR5elNVh
— Guardian politics (@GdnPolitics) October 15, 2019
Barnier said:
‘This work has been intense all over the weekend and yesterday because, even if the agreement will be difficult – more and more difficult, to be frank – it is still possible this week…
‘Reaching an agreement is still possible. Obviously any agreement must work for everyone, the whole of the United Kingdom and the whole of the European Union.’
Renewed hopes of a Brexit deal has underpinned a dramatic rally in Sterling in recent days, with the GBP/EUR exchange rate having appreciated over four cents since Thursday.
The focus on Brexit has seen investors shrug off this morning’s gloomy employment figures, which revealed a shock rise in unemployment and weaker-than-expected wage growth in August.
Euro (EUR) Dented by Gloomy ZEW Surveys
At the same time, the Euro (EUR) is facing pressure this morning following the publication of the latest ZEW economic sentiment surveys.
These showed that pessimism within the Eurozone continued to grow through October, abet at a slightly slower pace than expected.
The increased gloom in the Eurozone comes as growth in the bloc continues to slow, with economists fearing that some countries such as German are at risk of falling into a recession this year.
GBP/EUR Exchange Rate Forecast: Brexit and Inflation in Focus for GBP Investors
As we approach the EU summit on Thursday we expected Brexit to continue to act as the main catalysts in the Pound to Euro (GBP/EUR) exchange rate.
Outside of Brexit, GBP investors will also keep an eye out for the UK’s latest Consumer Price Index (CPI).
This could offer some modest support to Sterling if inflation is shown to have accelerated in line with expectations in September, potentially providing the Bank of England (BoE) with more room to leave interest rates on hold.
Meanwhile, there is likely to be further gloom surrounding the Euro tomorrow as the Eurozone’s final CPI print for September is expected to confirm that inflation in the bloc slumped to a two-year low.
As inflation continues to diverge from the European Central Bank’s (ECB) target rate of 2%, speculation that the bank could introduce further stimulus is likely to continue to loom over the bloc liking limiting any upside in the single currency.