GBP/EUR Inches Up Amid Fading No-Deal Brexit Fears

GBP/EUR is advancing in early trading on Thursday. The pair has gained 0.31% as of 6:00 AM UTC, to 1.1719. There are still no fundamentals to back the price action, given that the UK, German, and other European markets are closed on Boxing Day. Yesterday, markets were closed on Christmas Day.

The sterling is recovering some of the losses of a dramatic post-election decline. The bearish mood has been driven by UK Prime Minister Boris Johnson’s intention to make it illegal for the government to extend the Brexit transition deadline beyond December 2020. Investors are worried that the tight timeline might lead to a no-deal Brexit, which will hurt the economy.

Nevertheless, the holidays have diluted these fears for a while, allowing the pound to rally on low volumes. Yesterday, the pair rose 0.13%.

The British currency has extended its gains on Thursday after a long-term analysis suggested that “Brexit would not damage UK’s status in the world” and the country would remain a dominant economy, ahead of Germany and France.

The Centre for Economics and Business Research stated that “despite Brexit, the French economy couldn’t overtake the UK” since the referendum. If the current economic trends continue, the British gross domestic product (GDP) will be a quarter larger than the French GDP by 2034.

The main drivers behind the UK’s economic growth will be the strong performance in tech, pharma, and creative industries. The economy will increasingly rely on a young population boosted by immigration.

The report says that the UK’s economy will overtake Germany and Japan by 2034.

However, European leaders, along with the opposition in the UK, believe that Brexit has caused serious damage to the economy. Earlier today, Frans Timmermans, who is executive vice-president of the European Commission, sent a love letter to Britons, saying that the UK economy has been unnecessarily damaged by Brexit and “more will follow. He said that the European Union will be always ready to welcome the UK back.

“You have decided to leave. It breaks my heart, but I respect that decision. You were in two minds about it, like you have always been in two minds about the EU,” Timmermans wrote.

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