GBP/EUR Exchange Rate Falls on Dimming Post-Brexit Trade Deal Hopes
The Pound to Euro (GBP/EUR) exchange rate fell from -0.3% today, with the pairing currently trading around €1.098.
Sterling fell today as hopes of a post-Brexit trade deal recede as the UK and EU engage in trade talks this week.
An EU official was also pessimistic saying:
‘We only go into the tunnel if there is going to be light at the end of it. People are getting carried away with the positive mood music before we even sit down to negotiate.’
Several EU sources also warned that there remains a large gap between the two sides. As a result, GBP investors are remaining generally cautious as this week is allegedly the eleventh hour of the negotiations.
In UK economic data, today saw the release of September’s Markit Manufacturing PMI. This fell below forecasts from 54.3 to 54.1.
Rob Dobson, the Director at IHS Markit, commented on the data:
‘September saw UK manufacturing continue its recovery from the steep COVID-19 induced downturn. Although rates of expansion in output and new orders lost some of the bounce experienced in August, they remained solid and above the survey’s long-run averages.’
Meanwhile, Sterling has benefited from yesterday’s relative bullishness from Andy Haldane, the Bank of England’s (BoE) Chief Economist,
Euro (EUR) Edges Higher as Eurozone Economy Gathers Momentum
The Euro (EUR) rose today following the release of September’s French Manufacturing PMI, which beat forecasts and rose from 50.9 to 51.2. As a result, single currency investors are becoming more hopeful for the Eurozone’s second largest economy.
Eliot Kerr, an economist at IHS Markit, commented:
‘The latest PMI results suggest that the French manufacturing sector remains on the path to recovery from the coronavirus-induced downturn. Both output and new orders increased further and there were signs that business confidence began to gather momentum.’
Today also saw the release of the Eurozone’s Manufacturing PMI for September, which confirmed consensus and held at 53.7.
Chris Williamson, the Chief Business Economist at IHS Markit, said:
‘Encouragingly, optimism about the future rose not only in Germany but also in France, Italy, Spain and Austria, hinting that the upturn could broaden out in coming months. Without a more broad-based recovery, the sustainability of the upturn looks at risk, with additional worries fuelled by rising Covid19 infection rates.’
GBP/EUR Forecast: Could a Lack of Brexit Progress Drag Down Sterling?
Euro (EUR) traders will be looking ahead to tomorrow’s EU Leaders Special Summit. Any dovishness about the Eurozone’s economy, however, would prove EUR-negative.
Tomorrow will also see the release of the flash Eurozone CPI figure for September. If this indicates a flagging Eurozone economy in the months ahead, then we could see the single currency suffer.
Pound (GBP) investors will be keeping a close eye on Brexit as the week comes to a close. Any signs of a lack of progress towards a post-Brexit trade deal would weigh on the GBP/EUR exchange rate.
Comments are closed.