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Pound to Euro (GBP/EUR) Exchange Rate Edges Higher on Hopes of Last-Minute Brexit Deal

European Central Bank

GBP/EUR Exchange Rate Rises despite No 10’s Hard Brexit Posturing

The Pound to Euro (GBP/EUR) exchange rate rose by 0.5% today, with the pairing currently trading around €1.108.

Sterling edged higher today despite Prime Minister Boris Johnson’s take it or leave it approach to a post-Brexit UK-EU trade deal.

However, Michael Gove, the UK’s Senior Cabinet Minister, commented:

‘It is ajar. We hope that the EU will change their position – we’re certainly not saying that if they do change their position that we can’t talk to them.’

As a result, GBP investors remain confident that the UK and the EU could strike a deal last minute.

The EU also has a history of walking out just before a deal is clinched, Brussels sources told The Telegraph.

Last week also saw the German Chancellor, Angela Merkel, agree that Europe needed to show a degree of compromise in order to secure a Brexit deal.

In UK economic news, today will see Sir Jon Cunliffe, the Deputy Governor for Financial Stability at the Bank of England (BoE), deliver a speech.

Any dovishness about the British economy in the months ahead would prove GBP-negative.

Moreover, if Mr Cunliffe drops any hints of a negative interest rate, then we would see Sterling suffer.

Euro (EUR) Sinks as Safe-Haven Demand Slides on Improving Chinese Economy

The Euro (EUR) suffered today following news that China has been the first big economy to rebound from the coronavirus pandemic.

Consequently, this has limited appeal for safe-haven currencies such as the Euro and the US Dollar, with investors seeking out riskier assets instead.

China’s central bank governor, Yi Gag, said on Sunday:

‘The Chinese economy remains resilient with great potential. Continued recovery is anticipated, which will benefit the global recovery.’

In Eurozone economic data, today will see the bloc’s latest Construction Output data for August.

Any improvement in Europe’s construction sector would prove EUR-positive.

Today will also see a speech from the European Central Bank’s (ECB) President Christine Lagarde.

Any downbeat comments about the Eurozone’s economy – or economic data – would prove EUR-negative.

This will be following by a speech from the German Bub President Dr Jens Weidmann’s speech later today.

Again, any dovishness about the Eurozone’s largest economy would prove detrimental to the single currency.

GBP/EUR Outlook: Could Brexit Hopes Continue to Bolster the Pound?

Euro (EUR) investors will be awaiting tomorrow’s release of September’s German Producer Price Index.

Any improvement in the Eurozone’s powerhouse economy would be EUR-positive.

Pound (GBP) traders will continue to focus on Brexit developments this week.

If the EU shows any willingness to compromise on a post-Brexit trade deal, then Sterling would head higher.

The GBP/EUR exchange rate could continue its upward trajectory this week if UK markets continue to doubt that the UK and the EU will settle on a no-deal.

As a result, hopes of a possible compromise from either side – from Downing Street or Brussels – could continue to prop up the Pound.