GBP/EUR: Pound Hits Weekly High vs Euro On Brexit Deal Hopes
  • Pound (GBP) tumbles from 2 week high
  • Brexit stuck on fishing
  • Euro (EUR) rises on weak USD & vaccine optimism
  • German IFO sentiment data in focus

The Pound Euro (GBP/EUR) exchange rate is extending losses for a third straight session. The pair settled just a few pips lower on Thursday at €1.1069 after hitting a two-week high of €1.1133. At 05:15 UTC, GBP/EUR trades -0.1% at €1.1056, at the low of the day.

The Pound has been driven sharply higher this week on the prospect of a Brexit trade deal being reached, potentially by this weekend. However, in a severe case of deja vu the Prime Minister Boris Johnson has once again warned that negotiations were in a serious situation.

Whilst differences surrounding the level playing field appear to have been smoothed out, fishing waters remains the key obstacle to a deal with neither side will to back down. The government is saying that if the EU don’t budget then the UK is heading for a no deal Brexit.

The Pound barely acknowledged the Bank of England monetary policy announcement. The central bank, as expected kept rates on hold at the historically low level of 0.1% whilst maintaining the bonding buying programme at £895 billion.

On the economic calendar today UK retail sales for November will be in focus. Expectations are for retail sales to drop -4.2% month on month down from 1.2% the previous month owing to the lockdown restrictions.

The Euro pushed higher across the board thanks to continued US Dollar weakness, vaccine optimism and no surprises from inflation data. Consumer prices in the region confirmed disinflation in November of -0.3% month on month, down from 0.2% in October.

EU regulators have brought forward the ruling on the Pfizer BioNTech covid vaccine. The announcement is now expected within the coming days with approval before Christmas.

Looking ahead, German IFO data is expected to show a deterioration in current conditions but an improvement in the outlook thanks to vaccine optimism means that the expectations part of the survey is forecast to tick higher.