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GBP/EUR Exchange Rate Rangebound as Brexit Continues to Dominate

December 4, 2020 - Written by John Cameron

The Pound to Euro (GBP/EUR) exchange rate is rangebound so far after recovering quickly from losses this morning.

At the time of writing the GBP/EUR exchange rate is currently trading at around €1.1082.

Pound (GBP) At Risk as Brexit Talks Thrown into Further Turmoil

The Pound (GBP) opened today’s session with losses, though quickly gained back momentum and remains rangebound against the Euro (EUR).

The chance of a Brexit deal has receded as the government is set to go ahead with new legislation to overwrite the withdrawal agreement by adding back in clauses from the Internal Market Bill, breaking international law.

In a move which could cause talks to collapse, investors look to a weekend showdown and any progress in a deal being made.

A UK government source said:

‘At the eleventh hour the EU is bringing new elements into the negotiation. A breakthrough is still possible in the next few days but that prospect is receding.’

Pressure also mounts as the French ambassador in Brussels has told Chief Negotiator Michel Barnier that Paris would prefer to restart talks with the UK in 2021.

With less than four weeks to go, GBP investors will continue to watch the talks and hope a deal can be found. The notion that a no-deal Brexit could invoke havoc on the UK as it tries to recover from the coronavirus pandemic continues to grow.

Euro (EUR) Fluctuates on Release of Eurozone PMI’s

The Euro (EUR) wavered this morning after the release of construction PMI’s from Germany.

German Factory orders rose for a sixth straight month in October, passing pre-pandemic levels. Factory orders rose 2.9% October, nearly double the 1.5% forecast.

Furthermore, news from Germany’s construction PMI shows that, the latest reading was up slightly from October's 45.2 and the highest since August, however still a contraction.

Phil Smith, Associate Director at IHS Markit said:

‘The construction sector's performance continues to be undermined by a general softness in demand for building work caused by the pandemic, though some encouragement can be gleaned from the fact the decline in new orders did at least show signs of easing in November.’

‘Constructors’ expectations have recovered some ground from a near-record low back in the spring and are now higher than at any point since the pandemic began.’

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

Looking ahead, the Pound to Euro (GBP/EUR) exchange rate will continued to be affected by any Brexit developments in the coming days, with a sense of urgency surrounding the post-Brexit deal as the deadline draws closer.

The Pound could be at risk if talks continue to fall back, with both the UK and EU faltering on hopes of a deal.

However, the Pound will continue to gain if a breakthrough, or a deal can be found.

The focus for EUR investors looking ahead will also be on any Brexit developments, and any news that a coronavirus vaccine rollout will follow in the Eurozone on from the UK’s approval of the Pfizer vaccine.

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