GBP/EUR Exchange Rate Stable on Cautious Brexit Deal Optimism
The Pound to Euro (GBP/EUR) exchange rate is trading in a narrow range this morning as cautious optimism for a Brexit trade deal next week is helping to underpin Sterling.
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1154, virtually unchanged from this morning’s opening rate.
Pound (GBP) Underpinned by Brexit Deal Hopes
The Pound (GBP) is holding its ground against the Euro (EUR) and majority of its other peers this morning amidst fresh optimism that the UK and EU will be able to agree upon a post-Brexit trade deal.
GBP investors were initially pessimistic on the chances for a deal at the start of this week, after the missing of the mid-November deadline, and Boris Johnson’s suggestion that the UK will ‘prosper’ even without a deal, unnerved traders.
But Sterling sentiment has subsequently improved, after the Sun reported that UK Chief Brexit Negotiator David Frost has told Johnson that he should expect a UK-EU trade deal ‘early next week’, as the two sides pinpoint ‘a possible landing zone’.
While markets had hoped a deal could be finalised before this week’s EU summit of leaders, the development is still welcomed news to GBP investors.
However, investors still seem reluctant to make any aggressive bets on the Pound, amidst fears talks could still breakdown over the issue of fishing rights and the level playing field.
Should the two sides be unable to agree to a deal soon, then a no-deal Brexit at the end of 2020 looks to be inevitable, an outcome a recent Bloomberg survey suggests could see the Pound drop up to 5%.
Euro (EUR) Rangebound as Vaccine Optimism Offset by Surging Coronavirus Case
The Euro (EUR) is trading flatly this morning as optimism over multiple potential coronavirus vaccines has been tempered by the realities still facing Europe as cases continue to surge across the continent.
Michael Hewson, Chief Market Analyst at CMC Markets said:
‘Despite this unbridled optimism it is also impossible to ignore the current backdrop to the vaccine news, which is seeing a continuation in the trends of rising infection, hospitalisation and mortality rates, across Europe.’
With the widespread roll out of these vaccines still months away and most Eurozone countries having reimposed lockdown measures in recent weeks, it looks inevitable that the bloc faces a double-dip recession this winter.