The Pound to Euro (GBP/EUR) exchange rate climbed this morning, with the pair currently trading around €1.109.
In a pivotal point for the UK-EU Brexit talks today, the Pound moves higher this morning on hopes Boris Johnson’s trip to Brussels will be constructive and a trade deal can be found.
Boris Johnson is to meet with President of the European Commission Ursula von der Leyen this evening for dinner with hopes that a breakthrough can be hammered out.
GBP investors are further encouraged this morning as Chancellor of the Duchy of Lancaster, Michael Gove gave the impression that the UK could compromise over fishing rights – one of the three outstanding issues to be resolved.
Mr Gove said this morning:
‘I think there can be scope for compromise but the compromise exists on the way in which European boats can continue to access UK waters.’
‘I think that we can reach arrangements with European countries that allow a staged process so there can be a degree of certainty, so that they can manage that.’
Additionally, the start of Britain’s vaccine rollout yesterday has also lifted confidence in the Pound as a return to normality in 2021 is anticipated.
EUR Dips as Outlook for Eurozone Economy Remains Uncertain
The Euro (EUR) fell this morning on the release of Germany’s Trade Balance report for October 2020.
The trade surplus in Germany narrowed slightly to €19.4 billion in October from €21.3 billion a year earlier as exports are down for the eighth month in a row.
Furthermore, the second wave of coronavirus continues to wreak havoc on the Eurozone, as Germany reported 590 Covid-19 deaths on Wednesday, the biggest daily increase since the outbreak began.
Germans are being told to reduce their social contacts starting next week and expect to be put into a “hard lockdown” from December 24 to January 10.
France and Italy also reported 831 and 634 fatalities, respectively.
GBP/EUR Outlook: UK GDP and Brexit in Focus
Looking ahead Brexit developments will continue to drive the GBP/EUR exchange rate this week.
If Boris Johnson and Ursula von der Leyen fail to make progress in last minute talks on the post-Brexit trade agreement then the Sterling would suffer.
GBP investors will be watching for key data releases including the UK October GDP release. Due early tomorrow, the release will show how much momentum the economy has had going into the latest lockdown in England.
The forecast for October is 0.4% down from 1.1% in September so it is likely that GDP will slow, putting pressure on the Sterling.
Tomorrow will also see the release of France’s Industrial Production, with forecasts showing an increase of 0.4% in October, which is a slow down on the previous month’s growth, potentially adding pressure to the Euro.