GBP/EUR Exchange Rate Steady on Brexit Deal Hopes
The Pound Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently fluctuating around €1.100.
Sterling held steady today on growing uncertainty over Brexit, after the European Union’s (EU) Chief Negotiator, Michel Barnier, said he would ‘intensify talks in London this week’.
Michael Gove, Downing Street’s senior Cabinet Minister, said that the EU’s move had been ‘constructive’.
Mr Gove said:
‘I welcome that and we need to make sure we work on the basis of the proposed intensification that they propose, and I prefer to look forward in optimism rather than necessarily to look back in anger.’
However, GBP is reflecting a degree of optimism in UK markets, with investors still hopeful that the two sides will strike a post-Brexit trade deal before the end of the year.
The British bank Barclays said:
‘Our take remains that despite the apparent lack of meaningful progress, UK and EU leaders are ready to push negotiations to the brink before reaching a deal.’
Meanwhile, Pound (GBP) investors will be monitoring Brexit developments throughout today’s session.
Any further signs that the two sides could compromise on a post-Brexit trade deal would prove GBP-positive.
Euro (EUR) Steady as Rising European Covid-19 Infections Weigh on Single Currency
The Euro (EUR) held steady against Sterling today as Europe’s new Covid-19 outbreaks have increased the threat of a double-dip recession.
Consequently, EUR investors are remaining cautious as the coronavirus pandemic threatens to severely limit the Eurozone’s economic recovery in the months ahead.
The latest edition of our weekly Coronavirus Watch compares our forecasts to the IMF projections published last week. The IMF's weaker forecasts for the US & eurozone are almost entirely due to lower projections for Q3 and upward revisions may be needed: https://t.co/HQXsAl4eaS pic.twitter.com/lf5gd1EbG1
— Oxford Economics (@OxfordEconomics) October 20, 2020
In other Covid-19 news, Italy’s Prime Minister announced further measures to curb the spread of a second-wave of infections on Sunday.
Additionally, with China’s economy set to be the only large economy to recover from the Covid-19 this year, investors have begun to seek out riskier assets than the single currency.
In Eurozone economic news, today saw the release of the German month-on-month PPI, which rose unexpectedly from 0% to 0.4%.
However, the year-on-year figure fell by -1%, sparking off concerns for the Eurozone’s largest economy.
GBP/EUR Forecast: Could Brexit Deal Hopes Boost Sterling This Week?
Euro (EUR) investors will be awaiting tomorrow’s speech from the European Central Bank’s (ECB) President Christine Lagarde.
Any dovishness about the Eurozone’s economy would prove EUR-negative.
Furthermore, rising Covid-19 infection rates throughout Europe could also weaken the EUR/GBP exchange rate.
Pound (GBP) traders will watch tomorrow’s release of the latest UK Consumer Price Index for September.
Any improvement in the British economy last month would provide a boost to Sterling.
The GBP/EUR exchange rate will remain sensitive to Brexit developments.
Consequently, we could see Sterling head higher this week if UK markets become more optimistic about a post-Brexit trade deal.