GBP/EUR Exchange Rate Bolstered by Brexit Optimism
The Pound to Euro (GBP/EUR) exchange rate is on the rise this morning as Sterling sentiment is underpinned by cautious Brexit optimism.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1014, up roughly 0.3% from this morning’s opening rate.
Pound (GBP) Strengthens on Reports of Possible Brexit Breakthrough
The Pound (GBP) is accelerating against the Euro (EUR) and many of its other peers this morning, on the back of fresh Brexit optimism.
This follows comments from the chancellor of the duchy of Lancaster, Michael Gove on Wednesday in which he suggested there is a ‘66% chance’ of a post-Brexit trade deal, during a session of parliament’s Brexit select committee.
Gove’s comments follow reports of a possible breakthrough on the issue of state aid after UK Chief Negotiator, Lord David Frost indicated the UK would accept the EU’s dispute resolution mechanism.
Sam Lowe, senior research fellow at the Centre for European Reform comments:
‘This is a big shift. I think what Frost was saying was that the UK has accepted that state aid is going to be subject to dispute resolution. This is the opening we were looking for to pave the way for an agreement on enforceability.’
However any suggestion of talks entering a ‘tunnel’ may be premature, as significant gaps on issues such as fisheries remain.
Irish foreign minister Simon Coveney said:
‘Michel Barnier has been very insistent on this. He is not going to move this process into a more intensive phase, which many people will describe as a tunnel, to try to close out through it the remaining issues unless he gets a very clear signal from the UK that they’re willing to show some flexibility and some realism around the need for fair and open competition between these two big economies.’
Euro (EUR) Undermined by Coronavirus Concerns
At the same time, the Euro (EUR) is struggling to find support this morning as Europe continues to contain its second wave of coronavirus infections.
This has led to fresh restrictions being imposed across the continent, with bars in Paris closed and restrictions imposed on movement in some cities in Spain.
The news of additional restrictions and their potential to negatively impact economic activity across the Eurozone has not been lost on EUR investors, who fear that the bloc’s fragile economic recovery could be at risk of stalling.
GBP/EUR Exchange Rate Forecast: ECB Minutes in Focus this Afternoon
Still to come today, is the publication of the minutes from the European Central Bank’s (ECB) September policy meeting.
This could see the Pound to Euro (GBP/EUR) exchange rate extend this morning’s gains if the minutes underpin the bank’s recent dovishness regarding the Eurozone’s economic recovery as well as its willingness to further ease monetary policy.
Meanwhile, we could see Brexit take a temporary back seat for GBP investors tomorrow with the publication of the UK’s latest monthly GDP release.
Will robust economic growth in August help to bolster the appeal of Sterling or will an underwhelming reading limit any further upside?