Pound to Euro (GBP/EUR) Exchange Rate Dips, Boris Johnson is Unwilling to Budge on Brexit

GBP/EUR Exchange Rate Falls as Brexit Uncertainty Drags on Sterling

The Pound to Euro (GBP/EUR) exchange rate dipped this morning, with the pairing currently fluctuating around €1.114.

Sterling traders are cautious this week after Prime Minister Boris Johnson has been forced into self-isolation following an alert from the NHS Track and Trace app.

Brexit concerns remain following reports from senior government insides that Boris Johnson remains the ‘hardest in the room’ on his unwillingness to secure a post-Brexit trade agreement.

A senior Whitehall source commented:

‘The prime minister is always the hardest in the room on Brexit – more so than perhaps other ministers and advisers.’

Hopes of a coronavirus vaccine have also helped steady GBP investors mood today.

The outlook for Britain’s economy has been improved by last week’s news of a successful vaccine trial.

Uğur Şahin, chief executive of BioNTech, was also optimistic about the Covid-19 vaccines effectiveness, saying:

‘I’m very confident that transmission between people will be reduced by such a highly effective vaccine – maybe not 90% but maybe 50% – but we should not forget that even that could result in a dramatic reduction of the pandemic spread.’

Euro Edges Higher Despite Concerns Over Europe’s Uncertain Covid-19 Situation

The Euro stabilised today after Eurozone markets heaved a sigh of relief after it was reported that Covid-19 infections had begun to flatten out across Europe.

Consequently, EUR traders are now more hopeful that the Eurozone could make a more sustained recovery in the months ahead.

Nonetheless, France has recorded a sharp rise in Covid-19 deaths, with the nation recording 32,095 new cases of virus over the weekend.

French Prime Minister Emmanuel Macron said that it would be irresponsible to lift or relax the current measures in place… at the risk of having to return to lockdown in December.’

Lothar Wieler, the head of Germany’s disease control agency RKI, commented:

‘I am cautiously optimistic. [T]he curve is rising somewhat less steeply, it is flattening.’

As a result, European markets are remaining cautious as another surge in Covid-19 cases in Germany – the Eurozone’s largest economy – could impede the bloc’s economic recovery.

GBP/EUR Forecast: Could No-Deal Brexit Fears Drag Down Sterling This Week?

EUR investors will be awaiting tomorrow’s release of the Eurozone’s Construction Output data for September.

Any improvement in the Eurozone’s construction sector could provide a further boost to the EUR/GBP exchange rate.

However, European markets will be monitoring Europe’s Covid-19 situation. If the Covid-19 infection rate heads higher, then this would prove EUR-negative.

Pound traders will be awaiting tomorrow’s speech from the Bank of England’s (BoE) Governor Andrew Bailey.

Any downbeat comments about Britain’s economic future, however, would be GBP-negative.

Brexit developments will likely drive the GBP/EUR exchange rate this week.

As a result, the pairing could head lower if Boris Johnson maintains his hard-line position on Brexit, threatening a possible no-deal by the end of the year.

David Moore

Contact David Moore