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GBP/EUR Exchange Rate Slumps Below 1.10 on Eve of Brexit Deadline

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GBP/EUR Exchange Rate Dented by No-Deal Brexit Fears

The Pound to Euro (GBP/EUR) exchange rate is on the defensive again this morning on growing fears that the UK is hurtling towards a no-deal Brexit.

At the time of writing the GBP/EUR exchange rate is trading at €1.0978, down roughly 0.3% from this morning’s opening rate.

Pound (GBP) Faces Sharp Sell-Off as Brexit Trade Deal Remains Elusive ahead of Deadline

The Pound (GBP) is looking increasingly vulnerable to a major sell-off this morning as there remains no signs that the UK and EU are close to finalising a post-Brexit trade deal in spite of tomorrow’s looming deadline.

Boris Johnson has vowed to walk away from negotiations on 15 October unless there is a clear outline of a deal in place.

While there has reportedly been some positive progress towards this goal in recent weeks, there is currently no sign that a deal is within sight.

In fact a report from Reuters suggest that at Thursday’s EU summit, EU leaders will deem that progress in talks is ‘still not sufficient’ enough to secure a new trade agreement.

However, the relatively limited drop in the Pound this morning suggests there is still some optimism among GBP investors a deal could be found at the eleventh hour or that Johnson may be willing to bend regarding Thursday’s deadline.

Euro (EUR) Tempered by Europe’s Coronavirus Woes

At the same time, support for the Euro (EUR) this morning has been capped amidst growing concern over Europe’s coronavirus resurgence.

Covid-19 cases continue to rise at an alarming pace across the continent, leading countries to impose stricter restrictions as they struggle to contain the virus.

This has raised concerns over the Eurozone’s fragile economic recovery as EUR investors fear that further restrictions could derail said recovery.

These concerns have been highlighted by the Eurozone’s latest industrial production figures as data published this morning revealed factory output in the block almost stalled in August.

Bert Colijn Senior Eurozone Economist at ING, comments

‘With rebound effects fading, second waves emerging and restrictive measures becoming more intrusive for business, there is no doubt that the rosy figures related to the rebound from the first lockdown are a thing from the past.’   

This in turn will raise expectations that the European Central Bank (ECB) will need to implement additional stimulus measures before the end of the year.