Pound to Euro (GBP/EUR) Exchange Rate Plummets on Fears of a No-Deal Brexit

GBP/EUR Exchange Rate Sinks as UK-EU Talks ‘Still Not Bridged Gaps’ on Brexit

The Pound to Euro (GBP/EUR) exchange rate plummeted by -1% today, with the pairing currently fluctuating around €1.096.

The Pound (GBP) fell today following comments from the European Union’s Chief Negotiator, Michel Barnier, who outlined a ‘very gloomy’ assessment of trade negotiations between the two sides.

Analysts at Reuters commented:

‘British and European Union negotiators have still not bridged gaps on the three main issues standing in the way of a post-Brexit trade deal and the talks could still go either way, an EU diplomat said on Monday.’

Consequently, UK markets are becoming more worried that the UK could leave the EU at year-end, sparking concerns that the UK economy could be set for heightened volatility.

Meanwhile, Simon Coveney, Ireland’s Foreign Minister, said that Michel Barnier was ‘very cautious about the ability to make progress today’.

As a result, the Pound (GBP) struggled against many of its peers this morning, with fears a no-deal Brexit dampening confidence in the UK’s economy going forward.

Euro (EUR) Rises as German Economic Outlook Improves on Stronger-Than-Expected Industrial Production Data

The Euro (EUR) rose today following the release of Germany’s Industrial Production data for October, which beat forecasts and rose by 3.2%.

Analysts and Bloomberg were more cautious about the Eurozone’s largest economy, however, 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, with a Covid-19 vaccine rollout due to be implemented across Europe, EUR investors are also more hopeful that the bloc could begin to recover its economy from the coronavirus crisis.

Added to this, demand for the Euro is relatively subdued as investors seek out riskier assets amid an improving outlook for the global economy.

In other Eurozone economic news, today saw the release of December’s Eurozone Sentix Investor Confidence data, which dipped by -2.7.

As a result, we could see the EUR/GBP exchange rate begin to head lower if the outlook for the Eurozone’s economy for 2021 continues to deteriorate.

GBP/EUR Forecast: Eurozone GDP Data in Focus

Euro (EUR) traders will be awaiting tomorrow’s release of the latest Eurozone Gross Domestic Product data for the third quarter.

Any improvement in the outlook for the bloc’s economy would be EUR-positive.

Tomorrow will also see the release of the German ZEW Survey of Economic Sentiment for December.

If this confirms forecast and rises to 46, then we could see the EUR/GBP exchange rate head higher.

Brexit will continue to dominate UK market attention this week, however.

As a result, we could see the GBP/EUR exchange rate continue to fall if it looks increasingly likely that the UK could leave the EU without a trade agreement at year-end.