GBP/EUR Exchange Rate Rises as UK Foreign Secretary Says There is a Brexit ‘Deal to be Done’
The Pound to Euro (GBP/EUR) exchange rate rose today, with the pairing currently trading around €1.118.
Sterling edged higher today as cautious Brexit optimism has returned.
This week has already seen UK Foreign Secretary Dominic Raab say that there is a Brexit ‘deal to be done’, but, in a more cautious tone, urged the EU to show ‘pragmatism’.
As a result, UK markets were uplifted by Raab’s relatively upbeat comments about the possibility of Downing Street securing a post-Brexit trade agreement.
Raab said:
‘If they show the pragmatism, the goodwill and the good faith that, in fairness, has surrounded the last leg of the talks – and certainly we’ve shown our flexibility – I think there’s a deal to be done.’
Nevertheless, as Brexit talks enter their final stages, GBP investors are remaining cautious as talks could always breakdown at the last minute.
In UK economic news, today saw the release of November’s Manufacturing PMI, which beat forecasts and rose to 55.6.
Duncan Brock, the Group Director at the Chartered Institute of Procurement and Supply, was downbeat about the British economy:
‘The prospect of an extended recession continues to hover above the UK economy until clarity around a Brexit deal is reached and hopes for an effective vaccine supply chain are realised bringing much-needed normality.’
EUR Dips as Outlook for Eurozone Economy Remains Uncertain Despite Strong Manufacturing PMI
The Euro (EUR) fell today following this morning’s publication of the French Manufacturing PMI for November. The figure remained in contraction territory at 49.6.
Meanwhile, Germany’s Unemployment Rate for November rose by 6.1%, undershooting forecasts for a 6.3% rise.
Analysts at Reuters commented on the report:
‘The number of people on short-time work schemes, which have shielded the labour market from the brunt of the pandemic, fell to 2.22 million in September. This compared to roughly 2.6 million in the previous month and a peak of nearly 6 million reached in April at the height of the pandemic.’
Today also saw the release of the Eurozone’s Manufacturing PMI for November, which beat forecasts and rose to 53.8.
Chris Williamson, the Chief Business Economist at IHS Markit, provided a glimmer of hope, commenting:
‘Eurozone manufacturing output continued to grow at a decent pace in November. Although the rate of expansion cooled from October’s 32-month high amid new lockdown measures, the sustained expansion should help to soften the economic blow of COVID-19 restrictions, which have hit the service sector hard. The survey therefore adds to evidence that the region will avoid in the final quarter of the year a similar scale of downturn recorded in the second quarter.’
GBP/EUR Outlook: Could Strained UK-EU Relations Drag Down Sterling?
Euro (EUR) traders will be awaiting tomorrow’s release of October’s German Retail Sales report.
Any signs that the Eurozone’s powerhouse economy could be struggling from Covid-19 restrictions would be EUR-negative.
Tomorrow will also see the European Central Bank’s (ECB) policymaker Philip Lane deliver a speech.
Again, any downbeat commentary about the Eurozone’s economy would drag on the EUR/GBP exchange rate.
The GBP/EUR exchange rate will remain sensitive to Brexit developments this week.
If it looks increasingly strained between the UK and EU, then the Pound would suffer as fears of a no-deal Brexit increase.