Pound to Euro Exchange Rate Surged More Easily amid German Recession Jitters
A surprisingly optimistic meeting between Britain and Ireland’s leaders has improved the Pound Sterling to Euro (GBP/EUR) exchange rate’s fortunes, and the pair is now on track to end the week higher.
Since opening this week at the level of 1.1232, GBP/EUR spent most of the week tumbling as Brexit deal hopes faded and the Euro (EUR) benefitted from rival weakness.
After touching on a monthly low of 1.1090 yesterday, GBP/EUR rebounded strongly on the latest Brexit developments. This morning, GBP/EUR was trending close to a high of 1.1321, which was the best level for the pair in two weeks.
The Euro outlook has been little changed this week amid mixed data, so Pound to Euro exchange rate movement has been driven largely by Sterling.
Pound (GBP) Exchange Rates Surge as UK and Ireland Leaders See Path to Brexit Deal
It’s been yet another turbulent week for the Pound (GBP). The week started out on fears that UK-EU Brexit negotiations could collapse completely, before Brexit hopes found fresh footing last night.
UK Prime Minister Boris Johnson and Ireland Leader Leo Varadkar met yesterday, and talks ended with both leaders saying they could see a path to a possible deal before the end of October.
These fresh hopes of a possible led to an overnight surge in the Pound. For now, no-deal Brexit fears have softened slightly from the British currency’s outlook.
Still, while optimism has risen, some analysts still believe a Brexit delay is the most likely outcome this month. According to Thu Lan Nguyen, Strategist at Commerzbank, markets are not betting on a deal being in the coming weeks:
‘Market hopes for a deal after all have been revived by these comments, following the rather negative comments that we saw in the last couple of days,
Overall I think the base case for the majority of market participants is that Brexit will be postponed.’
Euro (EUR) Exchange Rates End Week on Mixed Note amid Lack of Strong Support
Most of this week’s notable Eurozone data has been stats from Germany. However, concerns that Germany fell into recession in Q3 persist, and as a result the latest German data was too mixed to offer the shared currency any support.
German industrial production beat forecasts on Tuesday, but it followed disappointing factory orders stats at the beginning of the week. German trade data was underwhelming yesterday.
Rounding off the week, this morning’s German Consumer Price Index (CPI) inflation rate data simply met projections, ultimately having little noteworthy impact on the Euro.
With the Eurozone outlook remaining murky, the Euro was driven by strength in rivals instead. For most of the week, the Pound’s broad Brexit-inspired weakness, as well as weakness in the US Dollar (USD), supported the Euro.
The US Dollar and the Euro have something of a negative correlation, so US Dollar losses played a big part in Euro movement in recent sessions.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Eurozone Confidence and Inflation Stats
As of next week, it will be around half a month until the current Brexit date of October 31st, so the Pound’s focus on Brexit is not likely to let up any time soon.
Next week is likely to be another tumultuous week the Pound if UK-EU Brexit talks remain in uncertainty. Upcoming UK job market, inflation, and retail sales stats have the potential to be overshadowed by Brexit news.
So with Sterling’s outlook once again dominated by Brexit, the Euro could be in the driver seat for GBP/EUR in the coming sessions.
Key Eurozone data on the way includes German and Eurozone economic sentiment data from ZEW on Tuesday, inflation rate data on Wednesday, and German wholesale prices on Friday.
If this data beats forecasts, it could offer the Euro some more solid support that could see it strengthen regardless of movement in rivals.
The Pound to Euro (GBP/EUR) exchange rate will continue to be driven by developments in geopolitics, such as US-China trade negotiations, as well.