British Pound to Euro Exchange Rate Tests 6-Month-Best on Speculation of Incoming Brexit Deal

In what is shaping up to be a pivotal week for the Brexit process, the British Pound to Euro (GBP/EUR) exchange rate has fluctuated in recent sessions as mixed reports give investors a mixed idea of how likely a Brexit deal is to be made in the coming sessions. Brexit focus is only likely to strengthen in the coming days.

Since opening this week at the level of 1.1442, GBP/EUR has trended both lower and higher. GBP/EUR dipped to a weekly low of 1.1401 on Monday, before rebounding and touching on a fresh six month high of 1.1511 on Tuesday afternoon. If there are positive Brexit developments soon, GBP/EUR could easily break a new six month high.

Typically influential UK job market data was published on Tuesday, and the Pound was supported slightly by news that wage prices had risen during the three months into September.

Average earnings including bonuses rose to 3.0% as forecast, while the previous figure was revised higher from 2.7% to 2.8%.

The figure excluding bonuses was impressive too, unexpectedly improving from 3.1% to 3.2%.

However, other parts of the fresh jobs report were met with more mixed reaction from analysts. Concerns rose that businesses were finding it more difficult to hire new employees despite record-level job vacancies, and the UK unemployment unexpectedly worsened from 4.0% to 4.1%.

Towards the end of Tuesday’s session however, the latest Brexit developments took focus and drove Pound movement instead as investors brushed over the UK job stats.

Following comments from a UK government Cabinet member suggesting that a deal could still be reached within the next 48 hours, investors bought the Pound on hopes that a deal was imminent.

Sterling’s gains were ultimately limited however, as the UK and EU were reportedly still stuck in a deadlock regarding the major issue of how to handle Ireland’s border post-Brexit.

Hopes for a Brexit deal bolstered the Pound on Tuesday, but Sterling was able to climb more easily due to weakness in the Euro.

Investors sold the shared currency on Tuesday, as Eurozone data continued to disappoint and concerns about Italy’s budget revived.

A few weeks ago, the EU rejected Italy’s budget proposal as the nation had planned too much government borrowing and spending.

As Italy has seemingly not prepared a revised budget plan by the EU’s given deadline (today), investors became anxious that Italy-EU tensions could be set to worsen further.

This, as well as a disappointing Eurozone economic sentiment survey from ZEW, left the Euro less appealing on Tuesday.

ZEW’s Eurozone economic sentiment index worsened from -19.4 to -22.0 rather than improving to -17.3 as expected. Germany’s current conditions print fell short of forecasts too.

With political developments retaking focus on Tuesday, these are more likely than data to drive the Pound to Euro exchange rate on Wednesday as well.

Following speculation that the UK and EU need to reach an agreement in the coming days in order to make it in time to hold an emergency summit before the end of the month, Brexit is likely to be the biggest focus of investors in the coming sessions.

If there are any signs that a deal will be reached, the Pound to Euro exchange rate is likely to surge regardless of upcoming UK and Eurozone data.

The opposite is also true though, if a deal is not reached in the coming days then investors may sell the Pound as ‘no-deal Brexit’ fears would worsen.

Euro investors will react to the EU’s response to Italy regarding its budget plans, depending on how severe the response is perceived to be.

Notable data due for publication on Wednesday includes UK inflation, German growth projections and overall Eurozone growth projections, which may also influence the Pound to Euro exchange rate in absence of any major political developments.