GBP/EUR Exchange Rate Undermined by Brexit Jitters
The Pound to Euro (GBP/EUR) exchange rate opens this morning’s session on the defensive, in response to ongoing Brexit anxiety.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1217, slightly down from this morning’s opening levels.
Pound (GBP) Retreats on Brexit Concerns
After a brief foray higher in overnight trade, the Pound (GBP) finds itself on the back foot once more this morning amidst ongoing Brexit uncertainty.
While there have been frequent reports over the past couple of weeks that a UK-EU post-Brexit deal is close to be finalised, so far there appears to be very little evidence that this is actually the case.
In fact, just yesterday, European Commission president, Ursula von der Leyen appeared to cast doubts on the chances of a deal as she suggested there are still ‘differences on three key issues’, the same differences which have dogged talks for months.
One of these differences is the issue of fishing rights, something that Boris Johnson recently signaled he would not be willing to bend on, whilst also reiterating that the UK will not extend the Brexit transition period past 31 December.
Chancellor Rishi Sunak remains optimistic on the chances of a deal, telling Sky News:
‘With a constructive attitude and goodwill on all sides we can get there. It’s clear what the shape of the deal looks like.’
However, Sunak tempered these comments by warning the UK government would not sign a trade agreement at any cost.
The threat of a no-deal Brexit remains a major pain point for the Pound, with GBP investors concerned about the economic damage it would cause the UK economy at a time when it is already on shaky ground due to the coronavirus pandemic.
Euro (EUR) Tempered as Germany Extends Coronavirus Restrictions
At the same time, the Euro (EUR) has only been able to find limited gains against the Pound (GBP) this morning following the announcement that Germany would be extending its coronavirus restrictions.
Chancellor Angela Merkel announced that the current measures will remain in place through December and could extend into 2021.
Merkel said:
‘Given the high number of infections, we assume that the restrictions which are in place before Christmas will be continue to be valid until the start of January, certainly for most parts of Germany.’
The move is likely to stoke fears that Germany could slip into a double-dip recession this winter.
GBP/EUR Exchange Rate Forecast: ECB Minutes in the Spotlight
Still to come today, we have the release of the minutes from the European Central Bank’s (ECB) most recent policy meeting later this afternoon.
EUR investors will be closely watching the release as they look for any hints as to the ECB’s likely plans to expand its stimulus programme next month.
This could help to bolster the Pound to Euro (GBP/EUR) exchange rate if ECB policymakers struck a more dovish tone than expected.
Meanwhile, it seems safe to assume that Brexit headlines will continue to act as the main catalyst of movement in Sterling through to the end of the week, likely infusing additional volatility into GBP exchange rates.