GBP/EUR Rate Hits 1.11

Image © Adobe Images

• GBP/EUR spot rate at time of publication: 1.1115
• Bank transfer rate (indicative guide): 1.0826-1.0904
• FX specialist providers (indicative guide): 1.0973-1.1037
• More information on FX specialist rates here

The Pound-to-Euro exchange rate was on course to touch early December highs once more following a strong 24 hour advance that saw it hit 1.1119 on Wednesday, amidst suggestions the odds of a Brexit deal is now set at 80%.

The latest advance means the pair has staged a strong recovery from Friday's month low at 1.0832, and further gains could be possible were the EU and UK to finally strike a post-Brexit trade agreement.

Foreign exchange analyst George Vessey of Western Union says the odds of a Brexit deal being reached now stand close to 80%.

"Markets betting exchange sees an 80% chance of a UK-EU trade deal this year, which is being reflected in sterling’s strong rally over the past 24 hours. GBP/USD has spiked through $1.35 – a 2-week high - and GBP/EUR is edging towards €1.11," says Vessey in a briefing to clients.

Vessey notes that while the tone from the UK side has been less optimistic, the extension of the soft deadline on Sunday was seen as a positive step in the right direction.

"The Pound has been upbeat since," says Vessey. "The debate has now turned to how any deal might be scrutinised before year-end with UK MPs on standby to sit in the House of Commons next week ready to approve a deal."

Vessey warns a disruptive outcome could still arise though if the clock runs out.

"Both sides could be forced into a short-term no-deal scenario in 2021 before any trade agreement can be ratified and brought into effect," says Vessey. "Volatility gauges in sterling have spiked considerably higher over recent weeks, suggesting market participants are gearing up for a potentially turbulent year-end."

Above: GBP/EUR has risen through the course of this week.

Sterling rallied across the board after EU Commission President Ursula von der Leyen told the EU Parliament that the negotiating teams continue to make progress and that MEPs would need to match the ambition of negotiators by striving to pass any deal before year-end.

"The good news is that we have found a way forward on most issues," she said.

The comments allowed the Pound to Euro exchange rate to extend the previous day's gains, but Sterling also went higher against all other major currencies.

However, whether or not there will be a deal on Wednesday, or indeed this week, is still unclear.

"I cannot tell you whether there will be a deal or not. But I can tell you there is a path to an agreement now. The path may be narrow but it is there. It is therefore our responsibility to continue trying," said von der Leyen.

The EU Commission President confirmed two issues remain outstanding: level playing field & fisheries.

On the level playing field, von der Leyen said, "our aim is simply to ensure fair competition in our own market."

On fisheries she said discussion is still very difficult.

The BBC's Europe Editor Katya Adler reports on Wednesday that while progress has been made in all outstanding areas of talks, progress on fish has not been forthcoming.

Adler explains that on this subject it's not just about ongoing UK-EU differences but also tensions between EU coastal nations.

"France has famously been outspokenly tough on fish. Wants to protect French fishing rights in Channel. If it gets anything near what it wants, I’m told by EU insider, then EU wld have to compensate by giving up rights in other waters eg around Cornwall, also north of Scotland,' says Adler.

"Spain is very concerned. Danish and Dutch too. They ask why they should lose fishing jobs to placate Macron, these are just the complications intra-EU, never mind finding final fishing agreement with UK," she adds.

{wbamp-hide start}{wbamp-hide end}{wbamp-show start}{wbamp-show end}