GBP/EUR Exchange Rate Edges Higher as Door Remains Open on Brexit Talks
The Pound to Euro (GBP/EUR) exchange rate rose by 0.4% today, with the pairing currently trading around €1.100.
Sterling rose against the Euro (EUR) despite Clément Beaune, France’s European Affairs Minister, saying there had been ‘no new approach from the EU’ on Brexit.
Brexit negotiations are still on the agenda, however, after the EU’s Chief Negotiator, Michel Barnier, said that the door was still open.
Mr Barnier also said that the EU is now ‘ready to discuss all subjects on basis of legal text’, which has buoyed confidence in the possibility of a post-Brexit trade deal.
Consequently, GBP investors are hopeful that the two sides – Downing Street and the EU – could secure a post-Brexit trade deal before the end of the year.
In UK economic data, today saw the release of September’s Public Sector Net Borrowing, which soared to £35.367 billion.
However, this was lower than what the Office for Budget Responsibility – a fiscal watchdog – forecast.
Today’s @ONS figures show government borrowing exceeded £208bn between April and September 2020.
This compares to £31bn in the same period last year and is more than in any year on record. But it is £54bn, or one-fifth, less than the @OBR_uk’s ‘central’ scenario projection. pic.twitter.com/5hDvf990sx
— Institute for Fiscal Studies (@TheIFS) October 21, 2020
British Chancellor Rishi Sunak was also relatively upbeat in his response to public spending, saying things could have been far worse:
‘Whilst it’s clear that the coronavirus pandemic has had a significant impact on our public finances, things would have been far worse had we not acted in the way we did to protect millions of livelihoods.
‘Over time and as the economy recovers, the government will take the necessary steps to ensure the long-term health of the public finances.’
Euro (EUR) Sinks Ahead of ECB Speech
The Euro (EUR) fell against the stronger Sterling today ahead of speech from Christine Lagarde, the European Central Bank’s (ECB) President.
This week saw Lagarde appear dovish, saying that new Covid-19 restrictions would further heighten economic uncertainty for the Eurozone.
Consequently, EUR investors are cautious ahead of Lagarde’s speech today. Any further signs of dovishness being detrimental to the single currency.
Lagarde recently told the French newspaper Le Monde:
‘The second wave of the epidemic in Europe, particularly in France, and the new restrictive measures that accompany it add to uncertainty and weigh on the recovery.
‘If the situation deteriorates, this will obviously darken our forecasts, which we will revise in December.’
Meanwhile, EUR investors will be monitoring Europe’s Covid-19 infection rate.
If this continues to increase, the outlook for the Eurozone’s economy would nosedive.
GBP/EUR Forecast: Could Brexit Progress Further Boost Sterling This Week?
Euro (EUR) traders will be looking ahead to tomorrow’s release of the German GfK Consumer Confidence Survey for November.
Any indications that Germany’s economy – the largest in the Eurozone – is on the road to recovery would prove EUR-positive.
Tomorrow will also see the Eurozone’s flash Consumer Confidence report for October.
Consequently, the EUR/GBP exchange rate could suffer as the outlook for the bloc’s economy suffers from increased Covid-19 restrictions.
Pound (GBP) investors will be awaiting tomorrow’s speech from the Governor of the Bank of England (BoE), Andrew Bailey.
Again, any hints that the Bank could be taking interest rates into negative territory would prove GBP-negative.
The GBP/EUR exchange rate could rise this week if the UK and EU make progress towards a post-Brexit trade deal.