GBPEUR exchange rates have risen because UK Prime Minister Boris Johnson and EU Commission President Ursula von der Leyen have agreed to extend the UK’s Brexit deadline. Speaking by telephone yesterday, the two leaders agreed to “go the extra mile” so that the UK fully exits the EU on January 1st 2021 with an agreement.
This has strengthened the value of sterling versus the euro, because if the UK and the EU reach a Brexit deal before the deadline at the end of this year, it’s thought that this will benefit the UK’s economy in 2021 and beyond. Otherwise, the UK would have to revert to trading with Europe on World Trade Organisation (WTO) rules, which it’s thought would be less favourable as this would involve more tariffs and red tape.
Elsewhere, another factor that’s affected the GBPEUR interbank exchange rate recently is that the EU’s agreed its €1.8 trillion Covid-19 rescue fund. Until recently, the EU’s 27 member states had been unable to finalise the fund, because Hungary and Poland objected to the disbursement of the funds being tied to upholding the rule of law.
That said, now that the EU 27 have reached a deal, it’s thought that the funds will contribute to support Europe’s economy in the coming years. Following the deal, EU Council President Charles Michel tweeted: "Now we can start with the implementation and build back our economies.”
Looking to this week, the foreign exchange market will closely watch the UK’s and the EU’s Brexit negotiations for signs of a deal. Speaking on Sunday, PM Johnson told broadcasters that “I’m afraid we’re still very far apart on some key things, but where there’s life, there’s hope.” Any news is likely to affect the value of sterling versus the common currency.
In addition, it’s a busy week for both UK and Eurozone economic data. To begin with, official statistics agency Eurostat releases the euro currency bloc’s industrial production figures for October today at 10.00. These are forecast to show a healthy 2.0% month-on-month rise, following September’s 0.4% drop.
Then, on Tuesday 15th, the UK’s Office for National Statistics (ONS) publishes Britain’s unemployment statistics for the three months to October at 07.00. These are set to show a 0.3% rise in joblessness, to 5.1%. Meanwhile, at 09.00, the Eurozone’s preliminary composite PMI (Purchasing Managers’ Index) for December will be revealed, forecast at 46.2, well below the 50.0 figure that signals economic growth.
On Wednesday 16th, the UK’s inflation statistics for November will be published at 07.00, forecast at 0.6%, while the UK’s vital services PMI for December goes public at 09.30, pencilled in at a positive 50.5.
Turning to Thursday 17th, the Eurozone’s inflation figures for November are released at 10.00, forecast at just 0.6%, while at 12.00 the Bank of England is predicted to keep UK interest rates steady at 0.1%.
Then, on Friday 18th, UK retail sales figures for November are published at 07.00. These are forecast to show a 3.3% drop month-on-month, although on a yearly basis a 2.8% increase is pencilled in.
Any figures above or below these estimates have the potential to affect the value of sterling versus the euro, so be sure to consult your currency dealer.