Pound to Euro (GBP/EUR) Exchange Rate Rises as UK and EU Agree to go ‘Extra Mile’ in Brexit Talks

GBP/EUR Exchange Rate Edges Higher on Brexit Trade Deal Hopes

The Pound to Euro (GBP/EUR) exchange rate rose by 1% today, with the pairing currently trading around €1.103.

Sterling rose today after UK Prime Minister Boris Johnson and the European Commission’s President, Ursula von DER Leyen, both agreed to ‘go the extra mile’ to secure a post-Brexit trade agreement.

Johnson commented:

‘I think that the UK should continue to try. And I think that’s what the people of this country would want me to do. We’re going to continue to try and we’re going to try with all our hearts, and we’ll be as creative as we possibly can. But what we can’t do is compromise on that fundamental nature of what Brexit is all about.’

As a result, the Pound (GBP) has benefited from renewed optimism that UK-EU trade talks could result in a deal by the year-end.

Michel Barnier, the EU’s Chief Negotiator, was also optimistic, saying that a trade agreement between the two sides was ‘still possible’.

Barnier said:

‘We are going to give every chance to this agreement … which is still possible.’

Any further progress in Brexit talks today could see the GPB/EUR exchange rate head higher.

Euro (EUR) Falls as Germany Will Face Further Lockdown Restrictions in January

The Euro (EUR) struggled today following news that Germany – the Eurozone’s largest economy – will enter a strict lockdown from Wednesday 10th January.

Consequently, EUR traders are becoming more cautious as new lockdowns and increasing Covid-19 infections are weighing on sentiment throughout Europe.

Markus Söder, Bavaria’s Prime Minister, commented:

‘If we’re not careful, Germany could quickly become Europe’s problem child. For that reason, we had to and we must act.’

Last week saw the European Central Bank (ECB) announce a fresh burst of stimulus to aid the Eurozone’s economic recovery.

However, with Germany now facing a lockdown and other European countries likely to follow, the outlook for the Eurozone’s economy is looking increasingly uncertain.

Nonetheless, with Europe’s rollout of the Covid-19 vaccine, things are beginning to look brighter.

Christine Lagarde, the ECB’s President, saying that there are ‘good reasons to believe that by the end of 2021 we will have achieved sufficient herd immunity’ from the coronavirus.

In Eurozone economic news, today saw the release of October’s Industrial Production, which beat forecasts and rose by 2.1% month-on-month.

GBP/EUR Forecast: Could Hopes of a Brexit Deal Continue to Boost Sterling This Week?

Pound (GBP) traders will be awaiting tomorrow’s release of October’s ILO Unemployment Rate report.

Any signs of rising joblessness in the UK would be GBP-negative.

Brexit talks will continue to drive the GBP/EUR exchange rate over the course of this week.

If talks continue to show promising signs of progress towards a post-Brexit trade agreement, then we would see Sterling head higher.

Meanwhile, the Euro (EUR) is likely to remain subdued as some of the key Eurozone economies continue to struggle to contain the Covid-19 crisis.