GBP/EUR Facing Heightened Volatility as Brexit Deadline Draws Near

The Pound to Euro (GBP/EUR) exchange rate traded in a wide range last week amidst some back and forth over the prospect of a Brexit deal.

Last Week: Pound Rocked by Brexit Uncertainty

The Pound was initially stable last week after the UK and EU ‘agreed the importance’ of finding a post-Brexit trade deal over the previous weekend.

However Sterling was unable to sustain this trajectory in mid-week trade, following reports which suggested the two sides remained deadlocked on a number of key issues.

This gave way to additional volatility in the latter half of the week in response to some conflicting Brexit headlines, as well as the UK’s weaker-than-expected monthly GDP figures, which raised questions over the trajectory of the country’s economic recovery.

Meanwhile, it was far from plain sailing for the Euro last week as Europe’s soaring coronavirus infection rate resulted in a number of countries introducing stricter restrictions.

However the single currency ultimately remained well supported thanks to its negative correlation with the US Dollar, which was faced a clear selling bias last week.

Three Things to Watch out for This Week

1. Coronavirus Developments

With Europe now fully in the throes of its second wave of coronavirus infections and the UK facing new restrictions as cases continue to spike, it appears likely the GBP/EUR exchange rate will continue to fluctuate this week.

2. Brexit Uncertainty

Infusing additional volatility into the Pound this week will also be the considerable uncertainty surrounding Brexit as UK and EU negotiators race to find a deal before Thursday’s deadline.

3. ZEW Economic Surveys

In focus for EUR investors this week will be the latest ZEW economic surveys for Germany and the rest of the Eurozone. Will Europe’s coronavirus resurgence lead to a souring of sentiment this month?

GBP/EUR Outlook

With coronavirus and Brexit in the spotlight, it seems safe to assume trade in the GBP/EUR exchange rate will remain volatile this week.

Matthew Andrews

Contact Matthew Andrews