GBP/EUR exchange rates are by some measures already at 1.15. Many sources of the headline ‘interbank’ exchange rate are rounded up, and with GBP/EUR trading in the mid to high 1.14’s for most of this week. Technically, the level has not actually breached 1.15 yet but it does seem highly likely.
GBP/EUR exchange rates: Brexit the key driver
Positive Brexit news is clearly the main driver for the pound with the market becoming excited that yes, finally, a deal on the UK’s exit terms from the EU is in sight. This week remains pivotal in delivering on this expectation and all the indicators are that we should have something more concrete soon.
Sterling should advance further on an actual confirmation this is to be the case, but it is not a straightforward yes or no answer. The pound will be driven by the news but much of the positivity does seem to be priced in to current rates. I think it is well worth pointing out it was only at the end of August when GBP/EUR exchange rates were below 1.10.
Whilst Brexit news is more positive, there is a growing concern over the UK economy with the all-important Services data for October posting a 7-month low. Services is the largest component of UK GDP (Gross Domestic Product) so this is rather worrying.
Nevertheless, sterling was unfazed by this news earlier this week and this just highlights the importance of the Brexit news in determining the strength of sterling.
GBP/EUR exchange rate outlook
GBP/EUR exchange rates do seem very likely to reach higher but we have had numerous false dawns on Brexit. Plus, agreement this week will lead to an EU Summit where the matters must be approved by the EU before a parliamentary vote in the UK.
Brexit is not going to be magically solved in one day and clients expecting a smooth path ahead on GBP/EUR rates should be very aware of all manner of possible outcomes, which do remain on the table.
Thank you for reading and I would be delighted to hear from you and share some of my thoughts and insights on the direction the GBP/EUR exchange rate could now take.