The pound to euro exchange rate got off to a poor start at the beginning of this week as the reality of the Brexit talks reaching their final stages has sunk in. GBP to EUR exchange rates dropped below the key 1.10 handle providing euro sellers with a good opportunity to take advantage of, and the pound to US dollar exchange rate also dropped despite the US dollar weakening against most other major currency pairs.
Brexit Deal Hopes Kept Alive as PM Boris Johnson is Expected to Travel to Brussels
Yesterday the European Union’s Chief Negotiator, Michel Barnier outlined once again that time is running out and suggested that Wednesday will be the latest talks can go on. These comments softened the pound after being reported by RTE, an Irish news source, but since then there has been a glimmer of hope for a deal, which is why the pound has since climbed.
Yesterday evening there was a 90-minute phone call between UK Prime Minister Boris Johnson and the European Commission President Ursula von der Leyen regarding the current impasse. Although there are still issues blocking the deal UK PM Johnson has agreed to travel to Brussels in order to try and thrash out a deal at the last stages and this has pushed the pound upward from yesterday’s lows.
With regards to the pound’s value, updates regarding positive updates from the negotiations are having a positive impact on the currency, whereas when negative comments such as Michel Barnier’s yesterday are having a negative impact on the pounds value.
What are the Chances of a No-Deal?
JP Morgan, the investment bank this week suggested the chances of a no-deal Brexit now lie at 20%. This is an increase of a 3rd on their previous prediction but suggests that the financial markets still believe a deal with be struck. This could suggests a positive outcome from this week’s talks has been priced into the pound’s value which is perhaps the reason why GBP remains a long way from its annual lows against all major currency pairs. On the other hand because the financial markets don’t appear to be predicting a no-deal outcome and a messy departure for the UK from the EU, should there be no-deal we could see a sell-off in the pound’s value.
Despite Barnier’s comments about Wednesday being the cut-off point, some media sources such as the BBC have predicted that Johnson will travel to Brussels either on Wednesday or Friday. There will be an EU Summit beginning on Thursday so this could get in the way of further negotiations which is perhaps why Barnier outlined Wednesday as the deadline.
Outside of the UK’s busy schedule politically there will be a raft of economic data releases this Thursday. UK GDP, Trade Balance, Manufacturing Production, and Industrial Production figures will all be released so it could be a busy morning for GBP exchange rates although I expect Brexit talks to continue to be the main driver of GBP value.
If you have an upcoming currency transfer or you would like to learn more on the factors impacting GBP to EUR exchange rates, feel free to contact me directly, Joseph Wright, using the form below.