GBP/EUR Exchange Rate Dips as Brexit Speculation Grows Following US Election Weekend
The Pound (GBP) dipped against the Euro (EUR) this morning. The pairing currently fluctuating around €1.105.
This week’s session began with a slight boost for Sterling after US elections revealed that Joe Biden will likely occupy the White House from January.
As a result, GBP investors have become more optimistic about a possible UK-EU breakthrough. US political developments have potentially offered further incentive for a post-Brexit deal.
Many analysts have voiced optimism over a Biden administration improving the likelihood of a Brexit trade agreement between the EU and UK.
Lee Hardman, an analyst at MUFG, commented:
‘It could increase pressure on the UK to finalise a trade with the EU. That prospect is likely helping to dampen downside risks for the GBP.
‘Overall, the prospect of a trade deal remains a positive potential catalyst for the GBP but doubts remain over the sustainability of any gains given weak UK fundamentals.’
Today will see the Bank of England’s (BoE) Governor, Andrew Bailey, deliver a speech.
Any downbeat comments about the British economy would prove GBP-negative.
Euro (EUR) Rises as German Exports Improve
The Euro (EUR) benefited from this morning’s release of Germany’s exports figure for September, which rose by 2.3%.
Carsten Brzeski, the Global Head of Macro at ING, commented on US political developments as being positive for the Eurozone’s largest economy:
‘If there is one single sector of the German economy in which the preliminary outcome of the US elections led to popping the corks, it is the export sector. With US president-elect Biden, the threat of US tariffs on European (read German) automotives should disappear. Even better, a possible revival of the transatlantic relationship and a possible investment package into sustainability and the fight against climate change could eventually also benefit German producers.’
Consequently, demand for the EUR edged higher following the announcement of Joe Biden being officially the President-Elect.
However, US political developments remain uncertain, with President Donald Trump yet to explicitly concede to the election results, which show Joe Biden having won by 290 to 214.
Euro (EUR) traders will be awaiting today’s speech from the European Central Bank’s (ECB) Yves Mersch, a member of the Executive Board.
Any signs that the Eurozone’s economy could be in for a tough few months would see the Euro shed some of its gains.
GBP/EUR Forecast: Could Hopes of a Brexit Breakthrough Bolster Sterling This Week?
Pound (GBP) traders will be awaiting tomorrow’s release of September’s UK ILO Unemployment Rate.
If this continues to rise, then the GPB/EUR exchange rate would suffer.
Tomorrow will also see the release of October’s BRC Retail Sales report for October. These are forecast to rise by 8.4%.
Euro (EUR) traders will be eyeing tomorrow’s release of the Eurozone’s ZEW Survey of Economic Sentiment for November.
Any slide in economic or consumer morale would prove EUR-negative as the outlook for the Eurozone’s economy grows darker.
However, we could see Sterling head higher this week. If UK-EU trade talks show signs of progression towards a post-Brexit trade deal, then the Pound would rise.