The GBP/EUR exchange rate fluctuated wildly this week as a result of considerable Brexit uncertainty.
Pound Rocked by Brexit Developments
The Pound has found itself on the back foot against the Euro again this week, as Brexit drama infused considerable volatility into Sterling.
This saw GBP exchange rise at the start of the week in response to reports that UK-EU trade talks had entered the so-called ‘tunnel’ stage of intensive negotiations.
However, the Pound was swiftly brought crashing back to earth after these reports proved false, with the EU’s Chief Brexit negotiator Michel Barnier warning that a deal ‘hangs in the balance.
While Sterling made another attempt to rally on Thursday amid some cautious Brexit optimism, this again proved short lived after as UK government source suggested the chance of a breakthrough is ‘receding’ after the EU hardened its stance in a key area of negotiation.
The Euro, meanwhile, has been able to maintain its upward momentum throughout this week, in spite of some underwhelming data releases.
This has been mostly driven by the broad weakness of the US Dollar, which has directly benefitted the Euro due to the negative correlation between the world’s most traded currency pairing.
Brexit to Continue to Dominate Sentiment
Looking ahead to next week, its likely to be another choppy session for the GBP/EUR exchange rate as Brexit remains firmly in focus.
Monday is seen as a potential cut-off date for a deal as the UK government plans to hold another vote on its controversial internal markets bill.
This could leave the Pound exposed to sharp losses if talks over the weekend fail to provide any kind of breakthrough.
Of course, should a deal be found, then we can expect to see Sterling rocket higher.
Meanwhile, the spotlight for EUR investors next week will be on the European Central Bank’s (ECB) December policy meeting, in which the bank is widely expected to announce another expansion to its quantitative easing programme.
Also, of note will be the EU summit of leaders in the latter half of the week. The summit is likely to focus on the EU budget, with the Euro potentially coming under pressure if Hungary continues to block it.