Brexit negotiations continue this week with Michel Barnier back in the UK to meet with Lord Frost. With only six weeks until the UK leave the EU negotiations are hotting up and the rumour mill surrounding the talks do not paint an entirely positive picture, this rhetoric continues to impact the GBPEUR exchange rate on a daily basis.
Currently locked in a debate around fishing rights and access to UK waters it is rumoured that Barnier has returned with a chart of proposed crippling tariffs on UK exports in an attempt to force the hand of Boris Johnson to grant greater access to UK coastal waters for the bloc.
It is widely believed that there is only one week left for viable Brexit negotiation to allow any necessary legal ratification of a deal to be implemented in both the UK and the EU, who will blink first in a game with such high stakes?
Eur to GBP exchange rates continue to be rangebound and the euro is holding ground in the key 0.8950-0.9250 territory while most of the world wait to see the final outcome of the UKs exit from the EU.
Markets Bounce on News of a Vaccine
Equity markets yesterday bounced significantly yesterday on the news that Pfizer have seen successful trials of a coronavirus vaccine. This bought real optimisim too the FTSE 500 in the UK which saw over 5% gains across the board.
The Pound could be a significant benefactor to a successful vaccine and therefore provide a much needed boost in exchange rates for those looking to buy euros. Deutsche Bank suggest that there are two reasons for a boost to the pound arguing that the UK has a “good exposure to Pfizer in its broad and deep vaccine portfolio” and has struggled the most with managing the pandemic without a vaccine”. Despite being positive news for us all the continued success of this vaccine could pose a threat to euro strength.
Is Deflation a Long Term Threat to the Euro?
Hopes of a V shaped recovery in Europe have dissipated as a second wave of COVID continues to spread across the continent, and deflation has become a real concern. Teetering on the brink of a ‘double dip’ recession there is now an argument for further monetary stimulus.
The European Central Bank have already implemented a €750billion stimulus package in the hope of stemming the economic impact of COVID and introduced negative interest rates in the hope of stimulating spending. This however, may not be enough and could reawaken the tensions within the EU between the wealthier northern countries and the southern. Any deepening of a divide here will have a bearing on the value of the GBPEUR and should be watched closely.
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