Euro to Pound Exchange Rate Gains Limited as Brexit Optimism Persists
Last week’s most significant currency exchange movement came as the Pound (GBP) surged on fresh hopes that a UK-EU Brexit deal was in sight, and this left the Euro to Pound Sterling (EUR/GBP) exchange rate much lower on the week.
After opening last week at the level of 0.8901, EUR/GBP spent half of the week trending with an upside bias and touched on a monthly high of 0.9016 on Thursday.
However, following Thursday’s surprisingly optimistic Brexit meeting between UK Prime Minister Boris Johnson and Ireland Leader Leo Varadkar, EUR/GBP plummeted as Sterling soared.
EUR/GBP ultimately lost over two pence from those highs, and closed the week just above a 5-month-low of 0.8700.
At the time of writing on Monday morning, EUR/GBP was climbing as investors sold the Pound from its best levels, and the pair trended closely to the level of 0.8761.
Euro (EUR) Exchange Rates Gaining despite Poor German Data
The Euro (EUR) has been moving more in reaction to movement in rival currencies in recent weeks, as the bloc’s data and economic outlook gives the shared currency little in the way of solid support.
That movement continued this morning, as Germany’s September wholesale prices report was published with mixed results.
Wholesale prices contracted at -0.4% month-on-month, lighter than the expected -0.6%. However, the yearly figure was a worse than forecast -1.9% contraction.
Despite this though, investors are already pricing in a period of prolonged weakness in the Eurozone economy amid German recession fears, and this data had no notable impact on the outlook.
Instead, the Euro advanced today as it benefitted from the Pound’s losses. The US Dollar’s (USD) movement has also been a little weaker amid market demand for trade-correlated currencies, which has boosted the Euro as the US Dollar’s rival.
Pound (GBP) Exchange Rates Sold from Best Levels Following Last Week’s Surge
When markets opened this morning, investors reacted to the weekend’s Brexit developments and last week’s impressive Pound surge by selling the British currency back from its best levels in profit-taking.
Last week saw a surge in hopes that the UK and EU could reach a Brexit deal in reaction to optimistic comments from EU officials following a meeting between UK and Ireland leaders, though markets still believe there will be a delay beforehand.
Some fresh doubts were expressed by EU officials over the weekend, that the chances of a deal being reached as soon as the coming weeks were highly unlikely.
This was part of the Pound’s weakness this morning. However, overall these doubts did not change the market outlook that a delay was likely before a deal, and as a result the Pound’s losses were minimal in comparison to last week’s impressive gains.
Euro to Pound (EUR/GBP) Exchange Rate to be overshadowed by Brexit Developments
A slew of typically influential Eurozone and UK data is set for publication throughout the coming week, but with only around half a month until the current Brexit date of October 31st that data may take a backseat.
The UK and EU will continue to hold Brexit negotiations this week, amid a highly anticipated EU summit.
As officials from both still believe there is a lot of work left to do on a new deal, it is perceived as unlikely that a deal will be agreed this week.
Despite this though, progress in talks is likely to be hugely influential for the Pound outlook, as well EUR/GBP movement this week.
Of course, if negotiations fall through it could worsen concerns that UK Prime Minister Boris Johnson will attempt to force through a no-deal Brexit at the end of October.
The Euro will be influenced by movement in rivals. However, if upcoming Eurozone data such as ZEW confidence stats tomorrow continues to disappoint investors, the Euro to Pound (EUR/GBP)