GBP to EUR Exchange Rate Rebounds on Hopes Brexit Negotiations Will Continue

October 14, 2020 - Written by Frank Davies

STORY LINK GBP to EUR Exchange Rate Rebounds on Hopes Brexit Negotiations Will Continue

A lack of drive in the Euro is leaving British Pound to Euro (GBP/EUR) exchange rate movement influenced largely by the Pound so far this week. Today’s movement has been driven by speculation over the direction of UK-EU Brexit negotiations, and a lack of direction in the Euro is leaving it volatile and easily influenced by stronger movements in rival currencies.

The mixed movement seen in GBP/EUR lately appears to be continuing this week. After last week’s slight slip from the level of 1.1040 to 1.1028, GBP/EUR continues to be trending closely to these levels overall.

GBP/EUR briefly edged higher to a monthly high of 1.1077 yesterday. However, these gains were short-lived as GBP/EUR also touched on a weekly low this morning.

Since then, GBP/EUR has rebounded slightly and currently trends just above the week’s opening levels. At the time of writing, GBP/EUR trends near the level of 1.1038.

GBP Exchange Rates Rebound from Morning Dip amid Coronavirus Hopes

This morning, the Pound slumped even lower after seeing jittery uncertain movement earlier in the week.

Concerns that UK-EU Brexit negotiations could collapse this week amid a lack of progress in talks have been weighing on Sterling this week.

Sterling losses briefly accelerated on reports that EU leaders would say at an upcoming EU Summit that progress has not been sufficient.

However, the Pound is currently recovering from this morning’s losses. The Pound bounced back from lows as sources said that Brexit negotiations would continue despite this week’s uncertainties.

Sources close to negotiations reportedly said that while a trade deal would be difficult, it was still possible and talks would continue beyond this week.

It softened concerns that negotiations could collapse if there was no notable developments before tomorrow’s self-imposed negotiation deadline.

According to Dean Turner, Economist at UBS:

‘The chances of no deal are still appreciable, but I continue to think that this would be more by accident than design,

But through all the noise, we should stick to one thought: it is in neither side’s interests not to have a deal.’

Still, the Pound’s appeal remains limited. Brexit uncertainty will persist, and even if a deal is made analysts predict it will not be a significant one.

Overall, amid this and the worsening UK coronavirus situation, the Pound outlook remains generally bearish.

EUR Exchange Rate Sees Little Influence on Eurozone Data and Eurozone Coronavirus Uncertainty

Investors have had little reason to move on the Euro in recent weeks. There has not been much surprising Eurozone data and the Eurozone economic outlook remains relatively optimistic compared to other major economies.

However, the coronavirus second wave has begun to hit the Eurozone hard.

Many major Eurozone economies have announced fresh lockdowns in order to contain the rate of infection. This has led to fears that the Eurozone economy will not be able to recover from the pandemic as strongly as hoped.

Today’s Eurozone industrial production report was a little stronger than forecast. However it ultimately had little impact on the Eurozone outlook or the Euro’s movement.

This is because the data will not have reflected the Eurozone outlook’s downward shift in response to the bloc’s worsening coronavirus situation lately. According to Analysts at ING:

‘this will be seen as a backward-looking indicator given the recent growing downside risk to the Eurozone economy, not reflected in today’s data’

Overall, analysts are increasingly predicting that the Eurozone’s rapid recovery is fading as the bloc faces a second wave of coronavirus infections.

GBP/EUR Exchange Rate Forecast: Brexit Developments Remain in Focus

While hopes for UK-EU Brexit negotiations to continue are keeping the Pound from falling today, the Pound still has the potential to fall in the coming sessions depending on how the Brexit process continues to unfold.

Tomorrow, Thursday the 15th of October, was initially a self-imposed deadline on UK-EU Brexit talks. There is still speculation that the UK government could walk away from talks if progress has not been sufficient enough.

If the UK government did leave or threaten to leave talks, the Pound could slump.

On the other hand though, if the focus remains on talks continuing or there is some sign of relations improving, the Pound could strengthen instead.

The Euro, on the other hand, is likely to focus on the Eurozone’s coronavirus outlook. New Eurozone restrictions and lockdowns could influence the Euro.

Pound to Euro exchange rate investors will also be watching upcoming comments from European Central Bank (ECB) President Christine Lagarde.

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TAGS: Pound Euro Forecasts