Pound Euro Exchange Rate Remains Supported by Brexit Optimism
Despite a lack of domestic support for the Euro (EUR), the Pound Sterling to Euro (GBP/EUR) exchange rate’s advances were dented today. Investors are buying the Euro due to weakness in its rival the US Dollar (USD).
Since markets opened this week, GBP/EUR movement has been fairly steady. GBP/EUR has been gradually climbing from the week’s opening level of 1.1148, and yesterday touched on a high of 1.1213.
However, the pair has been unable to even hold these modest gains, quickly slipping back. At the time of writing, GBP/EUR trends near the level of 1.1176.
GBP/EUR is currently around a cent below last week’s best level, which was the best level for the pair in six months. This means that GBP/EUR is still fairly strong overall.
Pound (GBP) Exchange Rates Remain Resilient as Markets Expect Brexit Deal
Expectations that the UK and EU could finally reach some kind of Brexit deal in the coming sessions are keeping the Pound (GBP) strong today.
While no Brexit deal was reached this week as initially hoped, UK and EU officials continue to show optimism. There is also speculation that the UK governments positions could soften.
This is keeping markets more optimistic that a deal is more likely than no deal. Currently, bets are rising that a deal could be presented sometime early next week.
Analysts at Westpac said that the risk of talks stalling further remains however:
‘Media and EU ‘sources’ have increased hopes for a deal next week and so disappointment is now a real risk for markets’
Euro (EUR) Exchange Rates Rebound despite Eurozone Gloom
The Euro was able to claw back a little ground against the Pound today. This is despite a lack of strong support for the Euro outlook in recent sessions.
This week’s Eurozone data has been generally unsurprising so far. What’s more, European Central Bank (ECB) officials continue to express concern about the health of the Eurozone amid the coronavirus pandemic.
Today, ECB President Christine Lagarde said:
‘Overall, the Eurozone economy is expected to be severely affected by the fallout from the rapid increase in infections and the reinstatement of containment measures, posing a clear downside risk to the near-term economic outlook.’
Rather than domestic support, the Euro is benefitting from weakness in its rival the US Dollar (USD) today.
Pound Euro (GBP/EUR) Exchange Rate Likely to Remain Strong amid Brexit Hopes
While its gains this week have been modest, the Pound to Euro exchange rate remains relatively close to its best levels in months.
What’s more, amid Brexit hopes and a lack of solid support for the Euro, the pair may be able to keep holding these levels or climb even higher.
Markets expect the UK and EU will reach a Brexit deal soon. If there is a Brexit deal announced early next week as speculated, the Pound could see stronger demand going forward and some major downside risks would fade.
However, for now downside risks are prevalent. There is still the possibility of talks being drawn out further or even collapsing. If this happens, the Pound could shed much of its recent resilience and tumble.
Tomorrow’s UK retail sales results could give markets a better idea of how Britain’s economy is performing amid the coronavirus pandemic. It is likely to be overshadowed by Brexit speculation however.
As for the Euro, it is likely to keep being influenced by movement in rival currencies. Tomorrow’s Eurozone consumer confidence data could cause a little movement as well.
Overall, the Pound Euro exchange rate will continue to be driven by Brexit and coronavirus developments in the coming sessions.