Pound V euro: GBP exchange rate strikes six-month high following Brexit ‘breakthrough’
THE pound is soaring against the euro this morning after the UK managed to finalise its exit agreement with the EU.
GBP/EUR is currently at around €1.148, up 0.24 per cent from this morning’s starting levels, but over a cent higher than the low of €1.131 struck on Thursday.
Sterling sentiment is high this morning as, following a long week of political wrangling by Theresa May, the UK was finally able to deliver an acceptable Brexit deal to the EU.
In a joint press conference with Mrs May in Brussels earlier this morning, European Commission President Jean-Claude Juncker confirmed that “sufficient progress” had now been made and that Brexit talks would be allowed to move on to the second stage.
The news that Brexit talks will now be able to progress to trade discussions will be a major relief to investors, many of whom had feared that trade talks might be pushed back to 2018 after the DUP torpedoed a potential deal.
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The DUP had on Monday disputed the wording of an agreement over the Irish Border.
However, it is important to stress that this was initially considered to be the “easy” part of Brexit talks and the UK government now faces the long and difficult task of negotiating Britain’s post-Brexit relationship with the EU.
At the same time, the euro slipped this morning following a surprise drop in Germany’s trade balance as the nation’s trade surplus narrowed from €24.1bn to €18.9bn in October.
This was largely due to a large jump in imports.
However, the decline in the surplus is likely to be welcomed by the rest of Europe as the surge in imports suggests that domestic consumption in Germany is ticking higher, something that may help rebalance trade in the Eurozone.
Looking ahead, the GBP/EUR exchange rate is likely to remain on strong footing next week if positive Brexit sentiment continues bolstering the pound.
That being said, Sterling sentiment could be slightly undermined at the tail end of the week.
It will come as the Bank of England (BoE) meets for its final rate decision of the year, with GBP likely to slip if policymakers remain dovish on the possibility of future rate hikes.
Meanwhile, the euro may rally next week with the publication of the Eurozone’s latest PMI figures.
Economists forecast that another robust month of economic activity in December will cap off a strong year of growth in the bloc.
