Pound to Euro Exchange Rate Seeing Sharp Fluctuations on Brexit Uncertainty
It’s been a highly volatile week for the Pound Sterling to Euro (GBP/EUR) exchange rate, and that volatility has only intensified. Hopes for a Brexit breakthrough have lasted much of the week, but by Friday there had been little sign of one.
Since opening this week at the interbank level of 1.09, GBP/EUR fluctuated. GBP/EUR jumped into the region of 1.10 at many instances, but has struggled to sustain gains.
At the time of writing on Friday morning, GBP/EUR was once again seeing highly mixed movement. The pair is trending near the interbank level of 1.10, not too far above the level of 1.09.
Sterling (GBP) will likely remain volatile until the outcome of this week’s UK-EU Brexit negotiations becomes clearer. High level talks are expected over the weekend to ‘take stock’, which could also lead to major movement at the beginning of next week.
Pound (GBP) Exchange Rates Volatile as Brexit Negotiations See Cloudy Conclusion
The final round of this year’s scheduled UK-EU Brexit negotiations are set to end today. After days of mixed reports over the status of talks, the Pound (GBP) has been highly volatile in the uncertainty.
Yesterday alone saw hopes of a negotiation breakthrough fade, then rise, then fade again. If there is no breakthrough soon, expectations and fears of a no-deal Brexit outcome will skyrocket.
According to Neil Jones, Head of FX Sales at Mizuho, this uncertainty is making the Pound outlook very unclear indeed:
‘If the headlines continue and we’ve got the EU/UK updates which continue to remain bullish to the Pound one moment and bearish to the pound one moment – and my guess is that’s what we do have in store – volatility will be greater and the potential ranges for the pound on a daily basis will be greater as well’
Euro (EUR) Exchange Rates Jittery on Market Risk-Aversion
The Euro (EUR) has been influenced mostly by global market shifts in sentiment and the strength of rival currencies over the past week.
The week’s Eurozone data has had little impact on the Eurozone outlook. Concerns about the Eurozone’s rising coronavirus cases have kept the Euro under pressure, making it easier for rival currencies to influence it.
Today, rising Brexit uncertainties, alongside reports that US President Donald Trump had contracted the coronavirus Covid19, weighed on market risk-sentiment.
With investors less willing to take risks amid the broad market uncertainty, the Euro was pressured as investors bought its safe haven rival, the US Dollar (USD).
This made it easier for the Pound to avoid losses against the Euro despite its volatility.
Pound to Euro (GBP/EUR) Exchange Rate Investors Await Next Steps on Brexit Process
The final day of scheduled UK-EU Brexit negotiations is set to take place today. If there is no breakthrough in talks though, markets will look to high level meetings set to take place this weekend.
UK Prime Minister Boris Johnson and European Commission President Ursula von der Leyen are expected to hold talks tomorrow. The talks will ‘take stock’ of trade negotiations and discuss what can be done next.
Any signs of a breakthrough over the weekend could lead to a surge in Pound (GBP) demand when markets open on Monday.
On the other hand though, if UK and EU negotiation sticking points persist and there are no signs of concessions, it is possible that negotiations could end without a deal this month.
This would lead to a surge in no-deal Brexit fears and broad Pound losses next week. As a result, the Pound’s movement is likely to be the primary cause of GBP/EUR movement in the coming sessions.
At the beginning of next week though, Markit’s UK and Eurozone services PMIs as well as Eurozone retail sales will also be watched by Pound to Euro (GBP/EUR) exchange rate investors.