The pound to euro pairing has come under further pressure as fears over the Brexit deal return. The latest twist in the saga came from France, who threatened to veto any deal that doesn’t meet their terms.
Pound to euro sold off on Wednesday from 0.1120, to trade at 1.1050 this morning but there is a risk of further losses. Stronger retail Sales data from Germany also helped to boost the single currency.
Brexit Twists Highlight Investor Complacency
Investors have been lulled into a false sense of security lately with officials claiming in recent weeks that a Brexit deal was 95% complete. Although this may be the case, many have forgotten the drama in Parliament that accompanied the Theresa May deal. As time runs out to avoid a No Deal outcome, France has highlighted the political risk to any deal by threatening to veto an agreement if it doesn’t like the terms. The situation was a reminder that any deal agreed by the two teams will still need to pass the EU27 countries and both the UK and EU Parliaments.
France is one of a group of countries worried that negotiators will turn over too many concessions to Britain in order to meet the deadline.
European Retail Sales Shine but Vaccine Race Could Dominate Forex
The euro was boosted on Wednesday by strong Retail Sales from the German economy with a reading of 8.2% versus the expected 5.9%. Unemployment data for the Eurozone came in as expected at 8.4% but the recent lockdowns could sour the economic data into the end of the year. Today will see the release of final PMI manufacturing and services data for both the UK and Europe.
The EUR to GBP exchange rate will still be dominated in the next two-to-three weeks by the Brexit talks, but moving into 2021 we are likely to see the race to implement vaccines as a big driver of forex rates.
Yesterday saw the Pfizer BioNTech vaccine approved by UK regulators and the immunisation program will begin next week in the country. Britain’s prime minister said the development provided, “sure and certain knowledge that we will succeed” in getting normal operations back by Spring.
Traders will now be looking to see which countries can lead the race on vaccines and get their respective economies open more quickly. Get in touch using the form below to be kept up to date with the latest market movements using the form below. I’ll be happy to respond personally.