Pound to Euro Exchange Rate Gains as Brexit Deal Passes Parliament

The pound to euro exchange rate was higher into Thursday after Boris Johnson’s Brexit deal passed Parliament with hours to spare. The agreement moved to the House of Lords, which approved the deal late on Wednesday, just one day before Britain is set to leave the European Union.

The GBP to EUR rate was trading 0.20% higher at 1.1090 after seeing support at 1.1000 yesterday.

Brexit Deal Finally Moves on From UK Politics

The signing of the deal ahead of the end of the transition phase today marks the end of four years of confusion and haggling. The Prime Minister said in an emailed statement:
“The destiny of this great country now resides firmly in our hands. We take on this duty with a sense of purpose and with the interests of the British public at the heart of everything we do.”
Following the referendum vote in 2016, the U.K. has seen two Prime Ministers resign and the goalposts have been moved constantly. The completion of the deal also helps Johnson to save some face after promising to deliver Brexit in his election manifesto.

The Brexit agreement means there will be no tariffs on goods traded between Britain and the EU, but critics say there are limited provisions for services firms, which makes up 80% of Britain’s economy. Attention will also turn to the Dover ports in order to see if the new rules are operating smoothly in the first week.

The pound to euro currency outlook will now see a key risk factor removed and investors may see sterling as undervalued as we enter a new year. This could lead to pound gains in the coming year and traders will be able to move back to economic releases as the driver for the rate. The other that will dominate will be the spread of the coronavirus and the rollout of vaccines.

Virus and Vaccines to Drive Economies in 2021

Although we will finally see the end to the Brexit confusion and bickering, we will still see the virus dominate currency rates in the new year.

The latest strain of the virus that was reported is seeing a spread into Europe, so that will remove the idea that this was isolated in the UK As we move forward into the new year, traders will be looking to see how the rollout of vaccines will tackle the virus. It’s likely that the first quarter of 2021 will be much like the end of 2020, where a flu season leads to rising cases as more vulnerable age groups get inoculated.

The GBP to EUR rate is trading within a range between the 1.0850 and 1.1250 levels and the next path will be defined by a breakout in either direction. With Brexit risk removed, there is surely some value in the sterling currency as both economies have been following similar trajectories with interest rates and spending.

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