- Pound (GBP) slumps on new covid mutation, b orders closing
- Brexit talks miss another deadline
- Euro (EUR) looks to consumer confidence data
The Pound Euro (GBP/EUR) exchange rate is slumping as the new week kicks off, paring some gains from the previous week. The pair rallied over 1% across last week, settling on Friday at €1.1029, approximately half-way between the weekly high and weekly low. At 05:15 UTC, GBP/EUR trades -0.55% at €1.0960 at the low of the day.
Brexit and covid remain the key drivers for the Pound. Over the weekend, parts of the UK including London were put into Tier 4 owing to a significantly more infection mutation of covid circulating in the South East. Many countries are also shutting their borders to the UK.
The mutation is reportedly around 70% more infectious causing the daily infection rate to surge 200%. Non-essential shops which rely on this key holiday trading period have been forced to once again shut their door and Christmas has effectively been canceled around a third of Brits.
Another Brexit deadline has come and gone. Brexit negotiators will continue talks, failing to agree on fishing by Sunday’s deadline. Hopes are for a deal to be agreed this week a few days before the December 31st final deadline. However, that optimism could be ill placed as talks are still stuck with differences still remaining of fishing rights. Michel Barnier said on Sunday that talks are at a crucial moment. Failure to bride the gaps will see the UK trade on unfavorable World Trade Organisation terms with its largest trade partner,
The Euro fell versus the Pound in the previous week but put in a resilient performance versus other major peers, despite surging covid cases, tighter lockdown restrictions and macros economic data falling short of impressive.
Whilst the preliminary estimates for PMIs were slightly stronger than forecast the service sector remained in contraction, industrial production declined and inflation remains in negative territory.
Looking ahead Consumer confidence for December is expected to remain unchanged from the previous monthly estimate at -17.6.