Euro Pound Exchange Rate Avoiding Bigger Losses as Brexit Uncertainty Persists
UK-EU Brexit negotiations have been extended yet again, but with half a month until the end of the Brexit transition period the Euro Pound (EUR/GBP) exchange rate is in for even more intense volatility.
After opening last week at the level of 0.9018, EUR/GBP took advantage of Sterling weakness and closed the week much higher, at the level of 0.9156. EUR/GBP also touched on a high of 0.9227, the best level for the pair in two and a half months.
Since markets opened this morning, EUR/GBP has been trending lower again. EUR/GBP trends at around the level of 0.9091 at the time of writing.
The Euro remains relatively appealing even as the Pound bounces on Brexit hopes. What’s more, these Brexit hopes are limited until real progress is made.
Euro (EUR) Exchange Rates Appealing on Eurozone Outlook and Rival Weakness
The Euro remains one of the market’s most appealing major currencies. Compared to the UK and US, the Eurozone is perceived as handling the coronavirus pandemic fairly well even as the bloc will see some notable restrictions during the holiday period.
Investors remain overall optimistic on the Eurozone compared to other major economies. Today’s better than expected Eurozone industrial production stats only boosted this sentiment.
The Euro is even more appealing amid weakness in rivals like the Pound and US Dollar (USD). The safe haven US Dollar is less appealing amid coronavirus vaccine news and hopes for US fiscal stimulus.
According to Valeria Bednarik, Chief Analyst at FXStreet:
‘So far, investors remain optimistic, with the good mood also underpinned by hopes for a US stimulus package, although no fresh news came from that front. News that several European countries are imposing fresh lockdowns to prevent the coronavirus contagions put a cap on EUR’s gains.’
Pound (GBP) Exchange Rates Rebound but Gains are Volatile and Limited
The Pound rebounded from lows this morning, in reaction to news that UK-EU Brexit negotiations had been extended again.
It follows a week of Pound losses, in which no-deal Brexit fears worsened.
However, while hopes of an imminent Brexit deal rose a little on this talk extension news, the Pound’s benefit from the news is limited.
The Pound’s volatility is worsening with only half a month to go until the end of the Brexit transition period. This is only likely to intensify.
Euro Pound (EUR/GBP) Exchange Rate Could Climb Again Unless Brexit Progress is Made
The Euro to Pound exchange rate has fallen today, but it may not be long before the pair starts climbing again.
Unless there is solid progress in UK-EU Brexit negotiations in the coming sessions, no-deal Brexit fears are only likely to worsen. Time to reach a deal is rapidly running out for a deal to be made, with only half a month left.
If no-deal Brexit fears worsen, EUR/GBP will more easily climb back to nearer its best levels.
What’s more, it’s unlikely that the Euro will weaken much in the coming sessions either. The Euro continues to benefit from rival weakness and coronavirus vaccine hopes.
Upcoming Eurozone PMI projections would need to be weak, and a Brexit deal reached, for the Euro Pound exchange rate to be dragged lower.