Sterling has made some moderate gains against the euro this week as news of Brexit talks progressing has helped strengthen GBP’s outlook. GBPEUR rates have been as low as 1.098 at the start of the week, but as positive news surrounding Brexit has emerged interbank rates have hit highs beyond 1.11.

We are deep in the midst of the Brexit talks with the fisheries issue still causing problems between both the UK and the European Union. The Brexit talks are still rumbling on and there are signs that things are getting closer to being resolved. German Chancellor Angela Merkel’s country could be one of the hardest hit as the car industry in Europe’s most successful nation could see a huge loss in demand.

What Could Happen to Sterling Exchange Rates?

What Could Happen to Sterling Exchange Rate in the Event of a Brexit Trade Deal?

According to one report the chances of a no deal Brexit are 45% according to credit insurer Euler Hermes. If a deal happens this could cause a loss of as much as €33bn in European exports of which Germany has over €8bn at stake. Economists at MUFG bank had suggested that despite the hype that is being generated surrounding how fantastic a trade deal would be for the pound and could see exchange rates at 1.15 according to the likes of BNP Baribas, the realistic boost sterling could experience is far more conservative that some experts predict.

However, whilst the talks rumble on then there is still a risk that the talks will not conclude positively and if a no deal is reached then this could cause a huge problem for the pound.

If the talks fail in a no deal, then it could be argued that it is lose-lose situation for both parties. That is why the talks continue to rumble on and why we could see a deal getting closer in the near future.

ECB Interest Rates Remain Unchanged

As COVID-19 continues to affect the world, European countries have introduced stricter lockdown measure to control the spread of the virus.

France and Germany have unveiled tighter restrictions that will see some businesses asked to close through November and December. French President Emmanuel Macron has introduced a 4-week national lockdown and German Chancellor Angela Merkel is following suit with a national lockdown being introduced from Monday.

Eurozone Economic Data

The Eurozone currently is experiencing weak growth, negative rates and sub-zero inflation which is leaving policymakers running out of options and spiraling the Eurozone into a number of problems.

On Thursday, the European Central Bank held its latest interest rate decision. Christine Lagarde gave the news that bank is to leave interest rates unchanged at -0.5% which was in line with what was expected, although this did not stop the euro falling against both sterling and the US dollar. In a statement, Lagarde expressed concerns about the new wave of the virus that is sweeping Europe and called for governments to provide fiscal support. Earlier on, data by the European Commission showed that the business and consumer survey was unchanged at 90.5 in October. Consumer confidence remained at -15.5.

Uncertainty as the Markets Await a Result on the Vote

US Election Next Week Could Cause Substantial Volatility for USD

We are just days away from the next US general election with Trump and Biden set to battle it out on Tuesday when we should hopefully find out who will become the new President of the United States. The voting appears to be getting closer and closer as each day passes. One of the crucial states is Florida which holds a lot of power in the election. Both election rivals are holding rallies in the southern state.

The US election on November 3rd next week is likely to create volatility in the currency markets and could see GBPUSD make significant moves over the next few days. Joe Biden is currently leading the national polls against Donald Trump, but it is likely that the swings states will have a significant impact on the result over the coming days as each side targets voters.

The US GDP published this week saw a 7.4% rise since the spring when lockdown was introduced and although not much of a surprise this has come at an opportune time for the current President.

The US dollar has weakened almost 6% vs both the pound and the euro in the last month as the US appears to be struggling to contain the virus and opinion polls showing less faith in the current US President.

Therefore, if you have an upcoming currency requirement make sure you’re well prepared for a lot of volatility next week.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.