GBP/EUR Exchange Rate Rangebound as Brexit Hopes Steady Pound
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.107.
Sterling (GBP) is rangebound against the Euro (EUR) despite reports that England may have hit a ‘critical’ stage in the Covid-19 pandemic.
Dr Simon Clarke, the associate professor of cellular microbiology at the University of Reading, described the surging infection numbers as ‘sobering’.
Mr Clarke added:
‘We can expect this situation to continue to deteriorate if authorities remain slow to react.’
As a result, GBP investors are remaining cautious as this could mean the UK faces more severe winter lockdowns.
This would further compromise Britain’s struggling economy.
However, optimism over Brexit continues to buoy Sterling as David Frost, the UK’s Chief Negotiator, heads to Brussels to continue UK-EU trade negotiations.
Consequently, GBP traders remain optimistic that the two sides could reach a deal within the next week or two.
Euro (EUR) Steady as European Markets Brace for ECB Interest Rate Decision
The Euro (EUR) is holding steady today ahead of the European Central Bank’s (ECB) interest rate decision later this afternoon.
The ECB is expected to hold interest rates at 0%. But any downbeat comments about the Eurozone’s economy would drag down the single currency.
Today will also see the release of the Eurozone’s Consumer Confidence report for October.
If this confirms consensus and dips to -15.5, then the dour outlook for the bloc’s economy would be EUR-negative.
Meanwhile, EUR investors are bracing for further updates on new French Covid-19 restrictions following reports that Eurozone’s second largest economy could be facing a nationwide lockdown.
Professor Jean-François Delfraissy, a key scientific advisor to the French Government, commented:
‘The scenario is rather to have this lockdown period of one month, to look at the different types of markers and then to exit this containment through, by example, a curfew that could continue through December, possibly covering also Christmas and New Year’s Eve, and to end it only in early January.’
Consequently, EUR investors are bracing for further compromises to the Eurozone’s economy, which is increasingly expected to face a double-dip recession in the fourth quarter.
GBP/EUR Forecast: Could a Brexit Breakthrough Send Sterling Soaring?
Euro (EUR) traders will be awaiting tomorrow’s release of Germany’s Retail Sales report for September. If this dips significantly – with forecasts expecting at -0.8% decrease – then EUR would suffer.
Tomorrow will also see the release of the flash Eurozone GDP figure for the third quarter. This is forecast to sink by -7%.
As a result of an increasingly dark outlook for the Eurozone’s economy for the fourth quarter, the EUR/GBP exchange rate could fall further.
The GBP/EUR exchange rate will be driven by Brexit developments. Any indications of a trade deal breakthrough before the weekend would send Sterling soaring.