Pound Euro Exchange Rate Continues to Trend High
While the Euro (EUR) was boosted by today’s US developments, the Pound Sterling to Euro (GBP/EUR) exchange rate has been able to hold most of this week’s gains so far. The Pound (GBP) remains appealing on hopes the UK and EU are getting closer to a deal.
Since markets opened this week, GBP/EUR has been trending with an upside bias. GBP/EUR started the week at the key level of 1.1200, and yesterday touched on a high of 1.1273. This was the best level for GBP/EUR in over half a year, since May.
While GBP/EUR has struggled to hold those highs, GBP/EUR has sustained most of the week’s gains. At the time of writing, GBP/EUR is trending near the level of 1.1260.
Pound (GBP) Exchange Rates Remain Appealing amid Brexit Hopes
The Pound continues to be one of this week’s most appealing major currencies so far. While Brexit has not benefitted from fresh developments as much as some rivals, it continues to benefit from Brexit speculation.
UK and EU officials remain optimistic that a deal can be reached. What’s more, some reports have emerged suggesting that a UK-EU post-Brexit deal could be edited in the future.
These factors have made markets more optimistic for a stronger Brexit deal eventually, even if the current talks are delayed. According to Jane Foley, Strategist at Rabobank:
‘There is scope for a relief rally in GBP on news that a deal has been signed, though the failure of the UK and EU to agree a comprehensive deal will likely limit upside potential,’
Euro (EUR) Exchange Rates More Resilient as it Benefits from US Transition News
Overnight, it was reported that the US Presidential transition would go ahead smoothly. The Trump administration indicated it would work with the incoming Biden administration.
It follows weeks of concerns that US President Donald Trump would attempt to contest or undermine Joe Biden’s US 2020 Presidential Election win.
The news boosted hopes that there would be less political uncertainty or civil unrest.
Markets were also joyed by news that ex-Federal Reserve Chairman Janet Yellen would join Joe Biden’s cabinet as the Treasury Secretary.
As the Euro’s safe haven rival, the US Dollar (USD), fell on today’s news, the Euro has been strengthening in return.
Pound Euro (GBP/EUR) Exchange Rate Could Stay Strong on Brexit Optimism
While the Euro was boosted by today’s US political news, the shared currency’s outlook remains limited. Concerns over the coronavirus second wave hitting the Eurozone economy continue to weigh on the Euro.
Unless upcoming Eurozone data is impressive to the upside, the Euro may not be able to strengthen enough to pull GBP/EUR lower.
German confidence data for December will be published on Thursday. Friday will follow with French inflation and growth, and the Eurozone’s latest overall confidence stats.
The Pound to Euro exchange rate may also fall if there are any disappointing Brexit developments though.
If there are no optimistic Brexit developments, or if UK-EU relations appear to worsen, the Pound could shed much of its recent appeal.
On the other hand though, continued optimism over Brexit could keep the Pound Euro exchange rate outlook appealing in the coming sessions.