- Pound (GBP) driven by lingering Brexit concerns & covid fears
- More UK cities to be put into Tier 3 lockdown restrictions
- Euro (EUR) under pressure as covid cases surge
- ECB & bloc’s Q3 GDP reading in focus
The Pound Euro (GBP/EUR) exchange rate is edging lower on Tuesday. The pair settled on Monday +0.2% at €1.1026, considerably down from the high of the day €1.1062. At 05:15 UTC, GBP/EUR trades -0.05%% at €1.1020.
Brexit and rising covid cases are the two key factors driving sterling. Brexit talks restarted last week and progress has once again been slow. Britain warned the EU on Monday that time was running out to bridge the differences that still remain on key issues.
Chief EU negotiator Michel Barnier has arrived in London to continue intense talks so that a deal can be reached governing nearly a trillion dollars in annual trade a year. The deal needs to be agreed before the UK leaves the transition period on 31st December or the UK will leave on unfavourable World Trade Organisation terms.
There is no high impacting UK data to distract investors from the sharply increasing covid numbers. Britain announced that more people will move into Tier 3 lockdown, the highest level of alert. This will now cover 8 million people,
Resurgent covid cases in Europe dragged on demand for the common currency in the previous session. The broad expectation is that the European Central Bank will be pushed into offering more support to keep the economic recovery from derailing.
The German IFO Economic Sentiment index fell by more than analyst expected to 92.7 in October, down from 93.4. Analysts had pencilled in a figure of 93. The weaker sentiment reading comes after PMI data at the end of last week showed that business activity in the bloc, but particularly service sector activity contracted steeply in October.
This week sees the ECB monetary policy announcement on Thursday. This is followed by the Eurozone GDP reading for the July – September period.
There is no high impacting data today. The euro will continue to be driven by covid headlines and risk sentiment in the broader market.