GBP to Eur Stable as Der Leyen Signals Consensus Approach to Trade Talks

Sterling vs Euro Rises as UK Job Market Outperforms

The pound to euro interbank exchange rate stands at 1.1803 today at the time of writing, very close to where it’s been over the past two days. By comparison, this Monday 6th January, sterling was as low as 1.1705 versus the Eurozone’s common currency, so it’s since strengthened by almost one cent.

The GBP to EUR interbank exchange rate remains supported, because yesterday, new European Commission (EC) President Ursula von der Leyen signalled a consensual approach to the UK/EU future trade talks. Speaking in London before meeting Prime Minister Boris Johnson at Downing Street, President der Leyen said that:

“The more divergence there is, the more distant the partnership has to be. And without an extension of the transition period beyond 2020, you cannot expect to agree on every single aspect of our new partnership. We will have to prioritise.”

Sterling Supported as Der Leyen Comments Reduce Risk of New Brexit Cliff Edge

For the financial markets, this signals that the EU is willing to agree elements of the UK/EU trade deal, ahead of PM Johnson’s deadline of December 31st 2020, and then agree the rest later.

Seemingly, this helps remove the risk of a new Brexit cliff edge. Here, if the UK and the EU couldn’t agree a trade deal by the end of this year, then Great Britain would have defaulted to trading with Europe on World Trade Organisation (WTO) terms.

Instead, President der Leyen’s remarks indicate that the trade talks will be smoother than the protracted Brexit negotiations, thereby supporting the GBP to EUR interbank exchange rate.

Germany’s Mixed Economic Data

Elsewhere, the pound is stable versus the euro, because Germany’s economic data this week has been mixed. On the bright side, retail sales rose by 2.1% in November, well above forecasts for 1%, suggesting that domestic demand is driving Deutchland’s economy.

Yet on the other hand, Germany’s exports fell by 2.3% in November, while factory orders fell by 1.3%. This indicates that the US/China trade war continues to weaken German manufacturing.

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