GBP/EUR Exchange Rate Flat as Brexit Remains in Focus
The Pound to Euro (GBP/EUR) exchange rate is rangebound so far this morning, as investors await more Brexit developments.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1062, slightly up from this morning’s opening levels.
Pound (GBP) Vulnerable to Further Losses as France to Take Hardline on Brexit Talks
Following a sharp sell-off on Wednesday, the Pound (GBP) opens today’s session mostly flat against the Euro (EUR) and the majority of its other peers.
This comes as Brexit remains the sole focus of GBP investors, with the latest twists and turns of trade talks driving considerable volatility in Sterling.
There currently appears to be some optimism on the UK side that a deal could be found, but there appears to be a growing split on the EU side over what leeway the UK should be granted.
An EU diplomatic source, said:
‘Member states want to be involved in the decision before the negotiators decide whether to strike a deal or not.
‘Germany wants an agreement now but there are political consequences in other states if the conditions demanded by the EU on a level playing field and fishing are not met.’
Reports suggest France in particular is concerned about giving too much away in talks, with the EU’s second largest economy said to be willing to walk away from talks and accepted a no-deal Brexit unless the UK government is prepared to start making significant concessions soon.
GBP investors are naturally unnerved by the prospect of a no-deal Brexit, amidst fears over the economic damage it will inflict on the UK at the same time that the country is dealing with the economic fallout of the coronavirus pandemic.
Euro (EUR) Steady on Positive Retail Sales
At the same time, the Euro (EUR) is holding its ground this morning after the Eurozone’s latest retail sales figure printed above expectations.
According to data published by European statistics agency, Eurostat, sales growth jumped from –1.7% to 1.5% in October, beating forecasts for a more modest expansion of 0.8%.
#Euro Retail Sales month-on-month at 1.5% https://t.co/d8tH8noByU pic.twitter.com/dBcAMmnyFi
— TRADING ECONOMICS (@tEconomics) December 3, 2020
However, while the jump in sale growth was welcomed by EUR investors, it failed to provide any strong support to the Euro, particularly amidst concerns retail sales will have fallen again in November as a result of new coronavirus restrictions.
GBP/EUR Exchange Rate Forecast: More Brexit Volatility Ahead?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate will remain highly sensitive to Brexit developments going forward.
This could see Sterling test new lows if headlines remain broadly negative, with limited progress or the breakdown of talks.
However, the Pound still remains well positioned to surge should a deal be found.
Meanwhile, the focus for EUR investors at the end of the week will be on Germany’s latest factory order figures, where an acceleration in order growth in October could buoy the Euro on Friday.