GBP/EUR Exchange Rate Rangebound Despite Improving Outlook for Eurozone Economy
The Pound to Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.125.
The Euro failed to gain against Sterling today following the release of Germany’s latest Gross Domestic Product (GBP) data for the third quarter.
Germany’s GDP beat forecasts and rose by 8.5% quarter-on-quarter following an unprecedented plunge following the first wave of the coronavirus crisis.
Germany’s Federal Statistical Office (Destatis) commented on the data:
‘This enabled the German economy to make up for a large part of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020.’
Today also saw the release of the Germany’s IFO Business Climate data for November.
Although the figure beat forests at 90, the outlook for the Eurozone’s largest economy remains uncertain going into 2021.
The Euro has also benefited from a weaker US Dollar today following US President Donald Trump’s agreement to begin transition for President-elect Joe Biden.
Consequently, safe-haven demand has slipped for the US Dollar, providing a boost for the Euro, which is negatively correlated to the American currency.
Pound (GBP) Steady as Covid-19 Vaccine Hopes are Tempered by Brexit Fears
The Pound held steady against the single currency this morning after yesterday’s positive Covid-19 vaccine news from AstraZeneca in Oxford.
Sterling has fallen following yesterday as concerns over Brexit remain as UK-EU trade talks show no clear signs of progress.
Already the Governor of the BoE, Andrew Bailey, has warned that a no-deal Brexit could cost more than the Covid-19 pandemic.
Mr Bailey said:
‘It takes a much longer period of time for the real side of the economy to adjust to the change in openness and change in the profile of trade.’
Nevertheless, with hopes of a Covid-19 vaccine rollout in the months ahead, GBP investors are cautiously optimistic.
Today will see a speech from the Bank of England’s (BoE) monetary policy committee member Jonathan Haskel.
Any downbeat commentary about the future of the British economy would prove GBP-negative.
GBP/EUR Outlook: Could Concerns of a No-Deal Brexit Drag Down Sterling?
Euro traders will be looking ahead to tomorrow’s European Union (EU) Financial Stability Review.
Any indications that the Eurozone’s economy could be headed for trouble at the end of the year would limit the single currency.
Sterling traders will continue to monitor Brexit developments this week.
If UK-EU trade discussions continue to show no signs of progress, then the GBP/EUR exchange rate would suffer.