Pound Sterling Euro (GBP/EUR) Exchange Rate Rises on Chance of UK-EU ‘Reconciliation’
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate rose by around 0.5% this afternoon. This left the pairing trading at around €1.1245.
Sterling was offered a further boost today after a Reuters report stated the EU are willing to shift its stance on fisheries.
Fisheries have been a massive stumbling block in the post-Brexit negotiations as currently, most fishing takes place in UK waters, but the majority of the catch goes to EU fishermen.
This would be the first major concession from the European Union, which boosted the Pound on Tuesday.
According to Reuters, an official stated:
‘There have been hints of a possible reconciliation. We would be looking to shift on demands to keep everything as is now, a somewhat maximalist opening position, if the UK also moved from its position of coastal attachment. That’s where the room for compromise lies.’
Pound Sterling Euro (GBP/EUR) Exchange Rate Edges Higher as German Consumers Await Severe Recession
The Pound Sterling Euro (GBP/EUR) exchange rate edged up by around 0.2%, leaving the pairing trading at around €1.1214.
On Tuesday morning, data revealed that German consumer sentiment improved for June after hitting its lowest level on record just a month earlier.
Data suggested the bloc’s largest economy is slowly recovering from the coronavirus pandemic as GfK’s survey rose from -23.1 to -18.9.
GfK revealed the gradual re-opening of businesses across Germany helped improve sentiment.
However, GfK’s Rolf Buerkl noted that uncertainty remained at high levels as many consumers anticipated a severe recession. This left the single currency under pressure and allowed GBP to make gains.
Commenting on this morning’s data release, Buerkl noted:
‘Anxiety over job losses remains high and has proven to be a key barrier to consumption at this time, alongside losses in income.
‘Retailers and manufacturers must continue to adapt to this situation.
‘For a number of freelancers, for example from the culture sector, there is still no end in sight for the lockdown. This means their income remains at zero.’
Pound (GBP) Rises on Global Recovery Optimism
Sterling was able to edge up on Tuesday on growing optimism about a global recovery from the coronavirus pandemic.
However, the recovery was limited as tensions between the United States and China escalated once again.
According to CMC Markets’ chief strategist, Michael McCarthy:
‘Markets are caught between two conflicting currents. Rising tensions between China and the U.S. are raising concerns, while easing COVID-19 lockdown measures are fuelling growth optimism.’
Meanwhile, trading was quiet on Monday as the UK was closed for a bank holiday while the US was closed for Memorial Day.
In Europe, Germany’s IFO survey was not as pessimistic as expected, with the data showing the light at the end of the tunnel as coronavirus lockdown measures ease.
However, final data revealed that the bloc’s largest economy was in a technical recession after first quarter GDP growth contracted by -2.2%.
Pound Euro Outlook: European Central Bank in Focus
Looking ahead, the Euro (EUR) could suffer further losses against the Pound (GBP) following speeches from European Central Bank (ECB) policymakers.
Added to this, the bank is due to release its Financial Stability Review which could further dampen the single currency.
If the ECB highlight the damage the coronavirus pandemic is likely to cause the bloc, the Pound Euro (GBP/EUR) exchange rate is likely to edge higher.