GBP/EUR Exchange Rate Strengthens as Brexit Deal Imminent
The Pound to Euro (GBP/EUR) exchange rate is trending higher this morning as investors eagerly await the expected announcement of a Brexit deal later today.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1165, up roughly 0.7% from this morning’s opening levels.
Pound (GBP) Surges in Preparation of a Brexit Deal
The Pound (GBP) is on the offensive against the Euro (EUR) and the majority of its other peers this morning on the expectation that a Brexit trade deal between the UK and EU will be finalised today.
Reports first emerged on Wednesday that a trade agreement was imminent, which triggered an initial rally in the GBP/EUR exchange rate.
After a night of feverish talks between UK and EU negotiators, including several calls between Boris Johnson and European Commission President Ursula von der Leyen. It appears that a deal is on the cusp of being announced.
Understand there were four calls between PM and EU chief Von Der Leyen yday to get Brexit deal over the line. One final one in about half an hour expected to sign and seal after late night wrangles over individual fish species (am not making this up)
— Laura Kuenssberg (@bbclaurak) December 24, 2020
However, a press conference to announce the deal has already slipped a couple of times this morning amidst reports ‘a last-minute hitch’ in regards to fishing has emerged.
But so far this does not seem to have deterred GBP investors, who have propelled the Pound to a two-week high against the Euro amidst confidence a deal will still be announced before Christmas.
Euro (EUR) Tempered by Coronavirus Concerns
At the same time, while retreating against the Pound (GBP), the Euro (EUR) is trending narrowly against the rest of its peers as the Brexit cheer is offset by concerns over the spread of the new variant of the coronavirus throughout Europe.
While EU leaders acted quickly to impose travel bans on the UK in an effort to help stem the spread of the new, more viral strain of Covid, it appears it may have been too late as cases of mutated virus are already being reported across the continent.
A handful of cases have so far been reported in Italy, France, Denmark and Belgium, with experts warning that the variant has already cross the borders of most of European countries.
Neil Ferguson, the Director at MRC Centre for Global Infectious Disease Analysis at Imperial College London, said:
‘ The fact that they [Denmark] have picked up 10 cases with sequencing of this new variant in a country as small as Denmark with a relatively low infection rate would suggest almost certainly, in my view, that this virus has been introduced to a great majority if not all of European countries at the current time.’
GBP/EUR Exchange Rate Forecast: Could Further UK Coronavirus Restrictions Temper Brexit Joy?
Looking ahead to next week’s session, it would seem likely that the Pound to Euro (GBP/EUR) exchange rate will remain fairly well supported through to the end of 2020 amidst the relief that the UK will not face a no-deal Brexit at the start of 2021.
However, these is still the potential for Sterling to face some headwinds in the days to come, amidst concerns over the spread of the mutated coronavirus strain throughout the UK.
Should cases numbers continue to explode the UK government may be forced into imposing stricter restrictions, with GBP exchange rates likely to come under pressure if there is any talk of another national lockdown.
Meanwhile, the Euro is also likely to remain sensitive to coronavirus developments, as any headlines pointing to a large rise in cases due to the new strain are likely to weigh on the single currency.