GBP/EUR Exchange Rate Rises Ahead of BoE Interest Rate Decision
The Pound to Euro (GBP/EUR) exchange rate rose by 0.3% today, with the pairing currently fluctuating around €1.110.
The Pound (GBP) continue to rise on positive sentiment around Brexit, with investors hoping that the UK and EU could compromise on a post-Brexit trade agreement before the year-end.
Richard Hunter, the Head of Markets at Interactive Investor, explains:
‘With the clock ticking on the deadline, hopes for a final breakthrough on Brexit negotiations remain finely balanced.
‘Sterling has seen some benefit from the irrepressible optimism that a last-gasp agreement will be made, although comments from the negotiators on both sides remain guarded.’
Today also saw reports that the UK and US were ‘close to a deal on cutting tariffs’, according to the White House’s Trade Chief Robert Lighthizer.
As a result, GBP investors are more optimistic about Britain’s economic recovery, with both Brexit deal hopes and Covid-19 vaccines promising stronger performance in 2021.
Meanwhile, today will see the Bank of England (BoE) announce its latest interest rate decision, which is forecast to remain at 0.1%.
However, any dovishness about Britain’s economic situation could clip some of Sterling’s gains.
Euro (EUR) Dips as Europe’s Coivd-10 Lockdown Restrictions Darken Economic Outlook
The Euro (EUR) dipped today following the release of the latest Eurozone Consumer Price Index for November, which fell by -0.3%.
However, the Eurozone’s business confidence as well as expected activity has been overshadowed by concerns over fresh lockdowns, particularly in Germany, the bloc’s largest economy.
Nicola Nobile, an economist at Oxford Economics, commented:
‘The eurozone economy continues to face some strong challenges. The recent decisions by some governments not to ease restrictions during the holiday period do not bode well in this respect.’
As a result, EUR traders are becoming increasingly jittery about the prospects for the Eurozone’s economy.
Germany, the Eurozone’s powerhouse economy, is due to re-enter Coivd-19 lockdown restrictions in January.
Today also saw the release of the French Business Climate for Manufacturing in December, which rose to 93.
However, with Europe on course for approving the rollouts of Covid-19 vaccine, EUR traders are becoming more cautiously optimistic about the Eurozone’s economic recovery.
GBP/EUR Forecast: Could Sterling Rise on Hopes of a Brexit Trade Deal?
Euro (EUR) traders will be awaiting tomorrow’s release of Germany’s IFO Business Climate data for December.
Any improvement in the outlook for Germany’s economic business morale would be EUR-positive.
Pound (GBP) investors will be monitoring tomorrow’s release of December’s UK Consumer Confidence gauge.
If this dips below forecasts, however, we could see Sterling shed some of its gains.
Tomorrow will see the release of the latest UK Retail Sales for November.
However, with sales expected to fall owing to lockdown restrictions, we could see the Pound begin to struggle.
The GBP/EUR exchange rate could head higher, however, if UK-EU Brexit talks show a degree of compromise between the two sides.
As a result, GBP would benefit from any indications that Brussels and Downing Street could conceded on a post-Brexit trade deal.