GBP/EUR Exchange Rate Dips as No-Deal Brexit Fears Drag on Sterling
The Pound to Euro (GBP/EUR) exchange rate dipped by -0.1% today, with the pairing currently trading around €1.101.
The Pound (GBP) remains subdued today following heavy volatility yesterday as fears of a no-deal Brexit severely tested confidence in the UK’s economy.
Jim Reid, an analyst at Deutsche Bank, described the situation has entered a ‘high-stakes game’, adding:
‘Though an in-person meeting was taken by some as a positive sign, along with the fact the two sides are still talking, a UK government source said to journalists that ‘Whilst we do not consider this process to be closed, things are looking very tricky and there’s every chance we are not going to get there.’’
The UK and the EU remain deadlocked on key issues such as fishing rights, trade, and governance.
This uncertainty has British markets concerned that the two sides will fail to reach a trade agreement by year-end.
Kyle Rodda, a market analyst at IG, said that markets are likely to ‘remain jumpy going into tonight’s trad as market participants await a definitive answer on the trade pact’.
In UK economic news, today saw the release of November’s BRC Like-For-Like Retail Sales report.
The figure rose by 7.7% but were prevented from further growth as November’s lockdown held back non-food sales.
Euro (EUR) Rises Despite Slight Revision of Eurozone’s GDP Data for the Third Quarter
The Euro (EUR) rose against the Pound today despite the Eurozone’s GDP data for the third quarter being revised slightly lower from 12.6% to 12.5%.
Paul Hannon, an analyst at MarketWatch, commented:
‘Those revisions mean the Eurozone economy suffered a smaller loss of output over the six months from April through September than previously estimated. Economic output in the third quarter was 4.3% lower than in the same period a year earlier, having previously estimated it was down 4.4%.’
Meanwhile, Germany’s ZEW Survey of the Current Situation for December fell below forecasts to -66.5. ZEW Economic Sentiment for December, however, beat forecasts and rose to 55.
ZEW commented in its publication:
‘The announcement of imminent vaccine approvals makes financial market experts more confident about the future.’
As a result, the Euro has continued to benefit from growing hopes that a Covid-19 vaccine rollout throughout Europe could aid the Eurozone’s economic recovery.
GBP/EUR Outlook: German Trade Balance Data and Brexit in Focus
Euro (EUR) traders will be awaiting the release of Germany’s Trade Balance report for October tomorrow.
Any improvement in the Eurozone’s powerhouse economy would further boost the single currency.
Tomorrow will also see the release of the EU-normalised French CPI data for November.
Again, any signs of the French economy recovering would be EUR-positive.
Brexit developments will continue to drive the GBP/EUR exchange rate this week.
If Downing Street continues to strike a pessimistic tone about a post-Brexit trade agreement, then Sterling would suffer.