Pound Euro (GBP/EUR) Exchange Rate Surges on Reports that the EU could give the UK Privileged Access to the Single Market

February 20, 2018 - Written by Toni Johnson

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Surges on Reports that the EU could give the UK Privileged Access to the Single Market

European Parliament Prepares to Give the UK Single Market Access Post-Brexit – GBP Exchange Rates Surge

The Pound Euro (GBP/EUR) exchange rate surged on Tuesday, supported by reports that the EU is preparing to negotiate bespoke, ‘privileged’ single market access for Britain post-Brexit.

According to a source close to EU Parliament Brexit Coordinator Guy Verhofstadt, the European Parliament is current in the process of compiling a 60-paragraph document that details the bloc’s desire for an ‘association agreement’ with Britain after Brexit-Day in March 2019.

The document will push for negotiations to focus on overall relationship structures, rather than other country-specific models like the Canada option.

This is a significant departure from the EU’s previous insistence that the UK cannot ‘cherry-pick’ a trade deal, and that it must choose from something akin to the Norwegian system or the Canadian one.

It should be stressed, however, that a comprehensive association agreement between the UK and the EU will very likely be subject to the European Court of Justice, something that Downing Street is trying to avoid over the planned 2-year transition period, and it could even require large regulatory alignment between Britain and the EU.

EUR Exchange Rates Slip amid Disappointing Shift in German ZEW Surveys

Euro (EUR) exchange rates came under pressure on Tuesday, suffering as the surging US Dollar (USD) siphoned investment away from various majors and remaining limited on the back of some disappointing German ZEW assessments.

According to the Mannheim-based ZEW research institute economic sentiment in Germany slipped to 17.8 in February, down from January’s 20.4 but above the consensus of 16.

Germany’s ZEW current situation reading also proved disappointing, falling from 95.2 to 92.3 and missing the forecast of 94.0.

Nonetheless, this is still the second-highest reading on record, and positive expectations that the German economy could see rising consumer prices also provided a semblance of support.

In other news, the performance of the Euro was also hurt today by the currently rallying US Dollar, with markets preparing for possible hawkish tones to be revealed in tomorrow’s US FOMC meeting minutes.

Pound Euro (GBP/EUR) Exchange Rate Forecast: UK Wages in Focus

All eyes will turn tomorrow to the UK’s wage growth readings, figures that could make or break investor hopes for a rate hike from the Bank of England (BoE) in May.

Markets current expect average weekly earnings to remain steady at 2.5% in December, though any result above this could reveal that the UK’s strengthening labour market has finally had a positive effect on wage growth.

If this does occur then the BoE would find even more reason to move hawkishly in May, particularly after the recent inflation figures proved higher-than-expected.

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TAGS: Pound Euro Forecasts