Euro to Pound Exchange Rate Edges Higher in Anticipation of Crunch Brexit Talks
Could a new UK-EU Brexit deal really be possible within the coming week or so? Amid speculation that the UK and EU were closing in on a kind of draft Brexit deal, the Euro to Pound Sterling (EUR/GBP) exchange rate is under heavy pressure.
Following last week’s plunge of almost two pence, EUR/GBP opened this week at the level of 0.8723 and could be on track to see even further losses if Brexit optimism continues to drive Sterling (GBP) higher.
The Euro’s (EUR) brief recovery attempt at the beginning of the week was short-lived, and yesterday EUR/GBP touched on a fresh 5-month-low of 0.8629. At the time of writing, EUR/GBP was trending half a pence higher at the level of 0.8689.
Euro (EUR) Exchange Rates Climbs despite Lack of Eurozone Support
Recent Eurozone data has continued to paint a gloomy picture for the bloc’s economic outlook, and German data has not done enough to indicate that the Eurozone’s biggest economy is recovering from a likely recession.
This continued yesterday, when ZEW’s October economic sentiment surveys from Germany and the Eurozone beat forecasts but still showed significant contractions.
With the Eurozone’s economic outlook still weak, the Euro (EUR) has been benefitting more from weakness in rival currencies.
EUR/GBP gains today were large due to the Pound’s losses, and mixed US Dollar (USD) demand has played a part as well.
The US Dollar (USD) is the Euro’s biggest currency rival, and recent weakness in the US Dollar (USD) on market risk-sentiment has benefitted the Euro as well.
Pound (GBP) Exchange Rates Slides from Highs Following Tuesday Rally
It’s already been another highly eventful week for Sterling, as the British currency saw a surge in demand on yesterday’s reports that the UK and EU could be getting closer to reaching some kind of new Brexit deal.
With an EU Summit set to be held at the end of the week, UK and EU negotiators have taken part in crunch talks since yesterday and these are set to continue.
Sterling rallied strongly on yesterday’s indications that a deal as soon as this week was still possible, or that a draft deal of sorts was getting closer to reality.
However, the Pound slipped back from its best levels today as investors became more cautious ahead of the summit, and as some reacted to speculation that the chances of an imminent deal were fading. BBC’s Laura Kuenssberg tweeted:
Govt sources are indicating this morning chances of a deal this week are now shrinking – this is of course, partly because room for manouvre limited by DUP and Brexiteers, even tho many of them are reluctantly on board
— Laura Kuenssberg (@bbclaurak) October 16, 2019
Euro to Pound (EUR/GBP) Exchange Rate Could See Huge Movement on Brexit Developments
While the Euro to Pound (EUR/GBP) exchange rate has been volatile this week so far, there is still the possibility that some kind of outcome for this month’s Brexit deadline will be in sight by the end of the week.
If the UK and EU really are able to close in on a deal, or if an imminent deal is perceived as likely, EUR/GBP is unlikely to recover much of its weekly losses. In fact, a deal being reached would sent the pair plummeting.
Still, those losses would be limited or even reversed if the deal is unable to pass through UK Parliament. A deal passing is still seen as unlikely by many analysts.
Of course, the Pound would also plummet if UK-EU Brexit negotiations fail in the coming sessions and relations worsen again.
Sterling is most likely to drive Euro to Pound (EUR/GBP) exchange rate movement, but the Euro may also be influenced by tomorrow’s Eurozone construction data, as well as movement in the shared currency’s rivals.