The GBP/EUR exchange rate made steady gains this week, climbing close to a one-month high through the session on the back of some renewed Brexit optimism.
Progress in Cross-Party Brexit Talks Bolsters the Pound
The Pound was put back on the offensive this week, climbing back above €1.16 for the first time in two-weeks as Sterling sentiment was bolstered by Brexit optimism.
This optimism was mostly centred on reports of progress in cross-party Brexit talks, with suggestions that Theresa May is prepared to give into Labour’s demand for a customs union with the EU as she seeks to wrap up talks next week.
Making Sterling gains all the more impressive was that they came amid a slew of upbeat Eurozone economic data in the first half of the week.
This included the Eurozone’s latest GDP print which surprised markets as it revealed growth in the bloc accelerated faster-than-expected in the first quarter.
The second half of the week saw the GBP/EUR exchange rate continue to rise, abet at a slower pace as investors appeared to shrug off the Bank of England’s warning that rates are likely to rise more frequently that markets expect.
Meanwhile, the Euro was able to limit its losses at the end of the session after Eurozone inflation was reported to have shot higher in April, with underlying inflation even striking a six-month high.
Cross-party Brexit Deal to Lift Sterling?
Looking ahead to next week’s session, we could see the Pound strengthen if as some analysts suggest we see a cross-party Brexit deal finally be announced.
Also in focus for GBP investors will be the publication of the UK’s GDP figures at the tail end of the session, which could lend support to Sterling if domestic growth accelerated in the first quarter as some economists suspect.
In the meantime, the publication of the Eurozone’s retail sales figures could help to bolster the appeal of the Euro at the start of the week, if sales growth is reported to have strengthened in March.
However any gains in EUR could unravel in the mid-week with the release of Germany’s industrial production figures as economists forecast, factory output will have contracted in March.
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