EUR/GBP Exchange Rate Soars as Brexit Jitters Drag on Pound
The Euro to Pound (EUR/GBP) exchange rate rose by 0.8% today, with the pairing currently fluctuating around £0.909.
Sterling has continued to suffer this week as UK-EU Brexit negotiations have shown no significant progress towards a trade agreement.
Despite the two sides reaching a consensus on fishing rights, EU law remains an obstacle for Downing Street, sparking concerns of a possible no-deal scenario at the year-end.
As a result, UK markets are becoming increasingly concerned about economic damage of a chaotic exit.
A senior EU diplomat commented on the situation:
‘The outcome is still uncertain, it can still go both ways. The EU is ready to go the extra mile to agree on a fair, sustainable and balanced deal for citizens in the EU and UK. It is for the UK to choose between such a positive outcome or a no-deal outcome.’
Consequently, demand for Sterling has fallen today, despite growing confidence that a Covid-19 vaccine rollout could limit some of the UK’s economic losses this year.
Nevertheless, Brexit is driving Pound movement today, and has resulted in substantial losses for the GBP/EUR exchange rate.
Euro (EUR) Rises as European Markets Remain Cautious Despite Strong German Economic Data
The Euro (EUR) rose today following Germany’s Industrial Production data for October, which rose by a stronger-than-expected 3.2%.
As a result, EUR has benefited from growing confidence in the German economy, which is the largest in the Eurozone.
Analysts at Bloomberg, however, warned of a second wave of Covid-19 impacting the Eurozone’s powerhouse economy, saying:
‘With most of Europe grappling with a second wave of infections and tighter containment measures, domestic and European demand is likely to moderate, pointing to downside risks for German manufacturers as the year end approaches.’
Nonetheless, EUR traders are becoming more hopeful that a Covid-19 vaccine rollout across Europe could limit some of economic impact from the Covid-19 pandemic.
GBP/EUR Outlook: Lack of Brexit Progress would Keep Sterling Subdued This Week
Euro (EUR) traders will be looking ahead to tomorrow’s release of the Eurozone’s GDP data for the third quarter.
Any improvement in the Eurozone’s economy would prove EUR-positive.
Tomorrow will also see the release of Germany’s ZEW Surveys Economic Sentiment and the Current Situation for December.
If either of these beat forecasts and show a more positive outlook for the Eurozone’s powerhouse economy, then we could see the Euro continue to rise.
The Pound is likely to remain subdued this week if UK-EU Brexit trade talks fail to show any progress on a post-Brexit trade agreement.