Sterling Euro Forecast: Brexit Talks and Upcoming GBP Economic Data to Influence GBP/EUR Exchange Rates Next Week

GBPEUR Lower After IFO Business Report

In this piece we look we look at what has happened in the mega-saga of the Brexit deal this week, and what to look out for in the coming week. The UK met with the President of the EU Commission earlier in the week to set their Brexit talks underway. Both parties appeared positive about the talks and looked keen to get to work and resolve a trade deal. Both currencies did little to shift despite the positive beginning to the talks and encouragement from the EU who suggested that they would be ready to agree to a full trade-deal but time may not be on their side.

First Week of Brexit Negotiations Get Underway, EU Starts Off Optimistic

EU Commission President Ursula von der Leyen started the opening week of talks off on a positive tone. She suggested that the EU would be looking to agree on a full trade deal but suggested that time is not on their side with the UK government setting a hard deadline of December 2020 to get the deal agreed. Because of this, it is likely that both parties will have to put their priorities first and bring forward to the table the issues which can be resolved during the 12-month window until the deadline. Both the euro and pound sterling showed little signs of movement as the talks got underway, for the market it may be too soon to make any clear judgements but with both parties entering the talks on a positive, get-it-done sort of attitude both sides could come out of the talks satisfied.

The GBP did gain on the euro a little mid-way through the week but saw a dip after BoE governor Mark Carney gave a dovish statement regarding the UK monetary policy, but this bump in the road seems to have little effect on the GBP in the long-run and instead the attention will be back on the Brexit talks and upcoming data.

UK and EU Look to Negotiate and Ratify Divorce Deal by End of January

As we head into a new week, the talks will continue with this divorce deal in mind. As of 1st February, the UK will no longer be an EU member and by the end of the year, Boris Johnson stated that an ambitious new trade deal will be negotiated and signed off by both parties. For the EU, losing a member state on 31st January will be a huge blow for the bloc. The UK holds many resources both monetary and military which the EU will lose after Britain’s departure. The UK also holds a seat on the UN security council.

As talks develop, one of the main topics to be negotiated upon appears to be fishing, despite contributing little to the overall UK GDP, the UK PM pushed for “sovereignty over our seas” in his Brexit pleas and now it seems to have become a ‘hot potato’ topic for the PM. Matters like this, services deals, manufacturing and freedom of movement issues will all be priorities which will need to find a resolution in the coming months of meetings.

Looking Ahead

Next week has some key economic data releases that may influence GBP/EUR exchange rates. On Monday, Manufacturing and Industrial production figures are released with a consensus of -0.2% for both vs a previous reading of 0.2% and 0.1%. Any deviation from the consensus reading could see volatility for pound sterling rates.

On Wednesday, the main release of the day is the Consumer Price Index. The Bank of England will be paying close attention to this release as any deviations to the consensus forecast of 1.5% may influence future monetary policy.

Lastly, on Friday, Decembers Retail Sales figures will be released. You may wish to keep an eye on these figures as it could influence sterling exchange rates.

If you would like to learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.