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Highly Volatile Euro to Pound Sterling Exchange Rate Awaits Outcomes of Brexit Talks

The Euro to Pound Exchange Rate is Fluctuating Widely Today as Brexit Speculation Shifts

It’s been a highly volatile day for the Euro to Pound Sterling (EUR/GBP) exchange rate. UK-EU Brexit negotiations are set to end this week, and mixed comments from different sources are leaving uncertainty over the fate of relations very high.

Last week saw the Pound (GBP) edging higher on Brexit hopes, pushing EUR/GBP down from 0.9167 to 0.9130 throughout the week.

While the Pound has continued to attempt to advance this week though, its efforts at holding its gains have been much more mixed. EUR/GBP has been fluctuating between lows of 0.9063 and highs of 0.9148 today alone.

At the time of writing, the Pound is again shedding some of this week’s gains amid Brexit uncertainty. However EUR/GBP still trends below the week’s opening levels in the region of 0.9100.

Euro (EUR) Exchange Rates See Little Influence from Today’s Eurozone Data

Demand for the Euro has been driven largely by strength in rival currencies in recent sessions. A weaker US Dollar (USD) has made the Euro more resilient, but EUR/GBP has still been more driven by the Pound instead.

Today saw the publication of the Eurozone’s final September manufacturing PMIs. However, the data was largely unsurprising.

The German figure fell slightly short while the French figure beat forecasts. The Eurozone’s overall figure matched projections, coming in at 53.7.

According to Chris Williamson, Chief Business Economist at Markit, the data generally indicated that the Eurozone’s outlook was a little more upbeat:

‘Job losses consequently eased as firms grew more upbeat about prospects for the year ahead, with optimism returning to the highs seen before the trade war escalation in early 2018’

The Eurozone’s August unemployment rate report did little to influence the Euro either. As forecast, unemployment worsened to 8.1%.

Pound (GBP) Exchange Rates See Broad Fluctuations amid Brexit Deal Uncertainty

The Pound has been trading all over the place today, plummeting then jumping then tumbling again as speculation over the UK-EU Brexit negotiation situation changes from one moment to the next.

For much of the week, markets have been hoping that there will some kind of breakthrough in negotiations that could lead to some kind of deal being reached at the last minute. This has been supporting Sterling.

This morning saw a report emerge with sources saying that the UK and EU remained too far apart on key issues to reach a deal. However later in the session a Financial Times reporter said that officials were instead becoming more optimistic that a deal would be reached.

Overall though, the uncertainty left the Pound weaker today and the British currency was unable to hold its best levels.

Euro to Pound (EUR/GBP) Exchange Rate Awaits Outcomes of Brexit Talks

The Euro has been little-impacted by Eurozone news this week so far. Even though Eurozone inflation data is due tomorrow, the Euro to Pound exchange rate is likely to keep being influenced by the Pound’s big movement potential.

The final scheduled round of UK-EU Brexit negotiations is set to come to an end tomorrow. If there is a breakthrough or talks are extended, like many analysts speculate, the Pound could see a jump in demand and push EUR/GBP lower.

On the other hand though, if negotiations appear to fail with no sign of a breakthrough, the Pound could plummet as markets pile into no-deal Brexit bets.

Brexit developments are highly likely to dominate EUR/GBP movement. Still, the pair could also be influenced by coronavirus developments and upcoming comments from central bank officials.

For example, the Euro to Pound (EUR/GBP) exchange rate could weaken if European Central Bank (ECB) Vice-President Luis de Guindos is surprisingly dovish in a speech tomorrow.