GBP/EUR Exchange Rate Sinks as UK’s New Covid-19 Strain Causes Disruption
The Pound to Euro (GBP/EUR) exchange rate plummeted by -1.4% today, with the pairing currently trading around €1.08.
Sterling suffered over the weekend after the UK missed the European Union’s (EU) Sunday deadline to agree on a UK-EU trade arrangement.
UK Health Secretary, Matt Hancock, said that the EU had ‘put in some unreasonable demands’ on fisheries. These have strained relations between the two sides amid a critical week for Brexit talks.
Meanwhile, GBP investors are becoming increasingly concerned for the British economy following the announcement of a new Covid-19 strain.
Consequently, European states have banned travel from the UK, with disruption escalating in Kent after France urged hauliers to avoid travel to the country until further notice.
Scottish first minister, Nicola Sturgeon, commented:
‘The new Covid strain – & the various implications of it – means we face a profoundly serious situation, & it demands our 100% attention. It would be unconscionable to compound it with Brexit.’
As a result, UK markets have become increasingly pessimistic about the future of the British economy as this year draws to a close.
Euro (EUR) Heads Higher Despite News that Germany’s Economy Could Shrink by 1% in Q4
The Euro (EUR) rose against the weaker Pound (GBP) today after Germany banned flights from the UK owing to Britain’s Covid-19 ‘mutation’.
Meanwhile, Germany’s economy – the largest in the Eurozone – is now expected to shrink by -1% in the fourth quarter, more than in the first quarter.
Claus Michelsen, a forecast at the at DIW institute, commented:
‘The German economy can only return to a recovery path if the situation substantially calms down. Even if it’s painful, we’ll have to endure the hard lockdown until at least the end of January.’
In Eurozone economic news, today will see the release of the flash Consumer Confidence data for December.
Any sings of deteriorating in consumer morale for the bloc would be Euro-negative.
GBP/EUR Outlook: Could Sterling Sink Lower on No-Deal Brexit Fears?
Euro (EUR) investors will be awaiting tomorrow’s release of January’s German GfK Consumer Confidence data for January.
Any improvement in the outlook for the German economy in 2021 would be EUR-positive.
Tomorrow will also see the release of the third quarter’s UK GDP figure, which is expected to remain at 15.5%.
However, if this is revised downwards, we could see the GBP/EUR exchange rate continue to sink.
Brexit developments will also remain the driving force of the pairing this week.
Any indications of Downing Street remaining unmoved on key issues in UK-EU negotiations could spark fears of a no-deal Brexit, which would significantly weaken the Pound.
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