Pound Sterling to Euro (GBP/EUR) Exchange Rate Edges Up on Brexit Hopes

Pound to Euro Exchange Rate Holds Away from Lows on Hopes for Brexit Developments

The Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to hold this week’s advance attempts. Lasting Brexit uncertainty is weighing on the Pound (GBP), but the British currency could still see gains if Brexit negotiations are extended as hoped.

Since opening this week at the interbank level of 1.10, GBP/EUR has been fluctuating widely. The pair has touched lows of 1.09 and a high of 1.11.

Last night, GBP/EUR fell back from its weekly highs as investors became concerned about whether or not a UK-EU Brexit trade deal was possible. At the time of writing on Friday morning, GBP/EUR trends just around the week’s opening levels.

Expectations that UK-EU Brexit talks will be extended are boosting Sterling slightly this morning. Meanwhile, the Euro’s (EUR) appeal is limited as the Eurozone’s coronavirus outlook worsens.

Pound (GBP) Exchange Rates Buoyed by Expectations for Brexit Talks

Last month, UK Prime Minister Boris Johnson threatened to walk away from UK-EU Brexit negotiations as soon as this week if there had not been noteworthy progress in negotiations.

While the EU has proposed a further two or three weeks of talks, the UK government has not yet confirmed that it will continue talks as well.

Reportedly, this morning UK Foreign Secretary Dominic Raab said that a Brexit deal was getting closer. He said that despite concerns about the EU’s negotiation positions:

‘Having said that, we are close. With goodwill on both sides we can get there.’

His comments helped to give the Pound a small boost this morning.

Pound investors also remain anxious about the possibility of tighter UK coronavirus restrictions, as the UK government’s tiered restriction system comes under criticism.

Euro (EUR) Exchange Rates Weighed as Eurozone Coronavirus Outlook Worsens

While the Pound outlook has been weighed by coronavirus concerns, the Euro has been unable to capitalise on this.

Investors are hesitant to buy the Euro too much as the Eurozone economy is hit by the second wave of the coronavirus pandemic.

According to Yohay Elam, Analyst at FXStreet:

‘Governments are trying to avoid national lockdowns and limitations to movements, but the current restrictions – and fears of new ones – already weigh on economic activity and hurt the common currency.’

On top of this, the Euro is weaker due to strength in the US Dollar (USD). The US Dollar is the Euro’s biggest rival and the currencies often see negative correlation.

Pound to Euro (GBP/EUR) Exchange Rate to be Influenced by Direction of Brexit

Markets are still awaiting news on whether or not UK Prime Minister Boris Johnson will agree to extend UK-EU Brexit negotiations.

UK negotiators have been reportedly surprised by the EU’s most recent negotiation conditions, but officials continue to express optimism. As a result, an extension from PM Johnson is still expected.

If he does agree to extend talks, the Pound to Euro exchange rate could see stronger demand. The Pound will climb on slightly stronger optimism that a Brexit deal of some kind can be made.

This could make it easier for GBP/EUR to sustain gains, as the Euro is being weighed by Eurozone coronavirus fears.

However, if Britain’s own coronavirus situation continues to worsen as well, the Pound to Euro exchange rate’s gains on Brexit optimism could be limited.

Josh Jeffery

Contact Josh Jeffery