Pound Holds Day’s Gains Versus Euro
(Updated 16:30, 12/11/21) The GBP/EUR exchange rate held onto gains it made early on Friday, and was up approximately 0.3% towards the end of the European session to trade at €1.1714.
Amid a subdued market mood, the Pound received a boost from further comments from European Commission Vice-President Maroš Šefčovič on UK-EU talks over the Northern Ireland protocol.
Following a meeting with his UK counterpart, Brexit minister Lord Frost, Šefčovič welcomed a ‘changing tone of discussion’.
Šefčovič said:
“We can and must arrive at the agreed solution that Northern Ireland truly deserves. That is also why I raised forcefully that we need to make serious headway in the course of next week.
“This is particularly important as regards the issue of medicines. An uninterrupted long-term supply of medicines from Great Britain to Northern Ireland is the protocol-related issue on everyone’s mind in Northern Ireland.”
Meanwhile, the Euro struggled through the session as Eurozone industrial production figures contracted for a second consecutive month in September. Production declined -0.2%, better than -0.5% forecast and an improvement on August’s -1.7% but a contraction nevertheless.
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Pound Euro (GBP/EUR) Exchange Rate Looks to Strengthen
The Pound Euro (GBP/EUR) exchange rate is edging slightly higher this morning, up approximately 0.2% on the levels at the start of the day.
After spending the second part of this week stuck in a narrow range, GBP/EUR attempts to hold above €1.17 may be driven by cautious optimism on UK-EU talks over the Northern Ireland protocol, and growing EU geopolitical tensions with Belarus and Russia going into the weekend.
Pound (GBP) Edges Higher ahead of UK-EU Talks
The Pound (GBP) is ticking higher this morning ahead of a meeting between Brexit Minister Lord Frost and European Commission Vice-President Maroš Šefčovič to discuss progress in negotiations over the Northern Ireland protocol.
Despite talks remaining deadlocked, and tensions appearing to escalate on speculation that the UK plans to use Article 16 to suspend parts of the agreement, reports this morning suggests both sides will seek to calm the row.
According to The Times, Lord Frost will aim to de-escalate tensions by saying the UK wants to avoid activating Article 16, and that the UK government will strive to reach an agreement on the Northern Ireland protocol.
Meanwhile, reports suggest the EU will also renew efforts to secure a deal by improving its offer to cut customs checks at the Northern Ireland border with the UK.
However, Šefčovič will likely insist a deal can only be made if the UK drops demands on the role of European judges.
Euro (EUR) Struggles amid EU Geopolitical Threats
The Euro (EUR) remains pressured this morning as tensions rise between the EU and Belarus and Russia.
A mounting migrant crisis at Belarus’ border with the EU has led to accusations that Belarus is using the situation to undermine the bloc’s security.
Reports suggest the EU will retaliate by using sanctions against Belarus. However, the country’s leader, Alexander Lukashenko, warned:
“If they impose additional sanctions on us… we must respond.
“We are heating Europe, and they are threatening us,” he said, referring to a Russian gas pipeline that runs through Belarus and into the EU.
“And what if we halt natural gas supplies?
Against the backdrop of soaring natural gas prices and shortages in Europe, the threat from Belarus could drive prices higher and harm economic activity in the bloc.
At the same time, a build-up of troops near the Russia-Ukraine border has led to a warning from the US that Russia could invade Ukraine, threatening stability in the region.
EUR exchange rates also remain pressured by strength in the US Dollar.
As US markets closed yesterday, when they reopen this afternoon the Euro may struggle again due to the negative correlation in the pairing, which has sank to 15-month low yesterday.
Pound Euro Forecast: EUR Set for Further Volatility?
A second consecutive month of contraction in Eurozone industrial production data for September released on Friday morning may weigh on EUR sentiment today, although the -0.2% reading beat forecasts of -0.5%, and is an improvement on August’s -1.7%.
The Pound Euro exchange rate may make some gains going into the start of next week if UK-EU talks over the weekend provide optimism over a potential deal on the Northern Ireland protocol.
Meanwhile, headlines over soaring Covid-19 cases in Europe could dent the Euro, especially if renewed restrictions loom, particularly in countries with low vaccination rates.