- Pound (GBP) is buoyed on optimism that Brexit talks will continue
- EU leaders will meet to assess progress in negotiations
- Euro (EUR) under pressure as covid cases surge
- France records over 22,000 new cases on Wednesday
The Pound Euro (GBP/EUR) exchange rate is edging cautiously higher, building on gains from the previous session. The pair settled +0.6% higher on Wednesday at €1.1075, after briefly piercing through €1.11 in a volatile session. At 05:15 UTC, GBP/EUR trades +0.05% at €1.1079.
The Pound surged in the previous session on news that the European Union and Britain could continue talks past British Prime Minister’s 15th October self-imposed deadline.
The EU Summit of leaders will take place today and tomorrow. Leaders will assess progress in Brexit trade negotiation talks. The EU Summit is expected to conclude that progress so far is still not sufficient and leaders are expected to tell EU chief negotiator Michel Barnier to step up talks in order to get a deal done by the end of the year.
Meanwhile, UK Brexit Secretary David Frost is expected to tell Boris Johnson whether he thinks a deal is plausible and whether it is worth continuing negotiations. Frost is expected to say that an agreement will be difficult but not impossible.
An UK spokesman said that Boris Johnson would take a decision after the EU Summit on whether to continue talks. In a call with EC President Ursula von der Leyen last night both leaders noted the desirability of a deal, although were disappointed with progress.
Separately, Boris Johnson resisting a full national lockdown to stem the spread of covid has offered some support to the Pound. With cases rising rapidly Boris Johnson has said that he will stick to his localised approach, rather than the two-week circuit breaker proposed by the opposition.
The Euro has been under pressure owing to rising covid cases across the region and growing fears that the resurgence will derail the fragile economic recovery.
France yesterday declared a public health state of emergency and a four-week nigh time curfew in the Paris region to battle surging cases. A further 22,951 covid cases were recorded on Wednesday.
Industrial production data for the Eurozone confirmed that the economic recovery almost stalled in August.