Pound to Euro Exchange Rate Lower with Brexit Talks on ‘Knife Edge’

Pound Sterling Breaks Out Above Key 1.14 Level Against the Euro

The pound to euro exchange rate was 0.20% lower in early European trading as Brexit talks come down to the wire. Negotiators are running out of time to secure an agreement and any deal would still have to be approved by the EU27 countries and European and UK politicians.

The GBP v EUR was trading at 1.1055 after highs of 1.1275 at the end of November. The euro also faces a big week with the European Central Bank interest rate meeting on Thursday.

Brexit Hopes and Fears Are Equally Matched

Irish Prime Minister Micheal Martin was pessimistic about the chances of a deal, warning that talks were on a “knife edge”. Martin added:
“I don’t think one can be overly optimistic about a resolution emerging and my sense, having spoken to some of the key principals here, that this is a very challenging issue to resolve, particularly around the level playing field.”

The country’s Foreign Minister was more positive about the outlook telling reporters, “We are more likely to get a deal than not because I think it’s in everybody’s interests,” adding that a trade agreement was, “97% or 98% done.”

After France threatened to veto a deal if the terms were not suitable, there is still a chance of drama ahead.

ECB Interest Rate Meeting Will Dominate the Trading Week

The European Central Bank will meet on Thursday to announce their latest interest rate and monetary policy decisions. The market is fully expecting additional stimulus measures from the ECB and this could weigh on GBP to EUR exchange rate.

The bank is expected to keep interest rates steady but provide additional cheap loans to banks and also expand their purchases of government bonds from European nations. Traders are looking for a six-month extension of the programs into the end of 2021.

Before the ECB meeting, the Eurozone economy will see the release of Q3 GDP estimates, while the German ZEW index of business sentiment will also be released. Last month’s number of 46 was an improvement from the dismal 39 in the prior month but sentiment indicators amongst shoppers and businesses is not being judged too critically in the current climate.

Thursday also sees the latest meeting of EU leaders in Brussels and Brexit negotiators will want to have the majority of a deal ready to present to the European nations by Friday.

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