Pound/Euro forecast

Good morning. Last week was a very good one for the Pound, rising to almost €1.14 vs the Euro and $1.31 vs the US Dollar. We have seen the currency markets stabilise slightly this morning, but the Pound is still strong against most other major currencies.

Why has the Pound gone up against the Euro?

The main reasons for the Pound going up last week, was optimism that a Brexit deal can be agreed between the UK and EU. Negotiators said on Friday that a deal could be very close, and would be agreed either this month or November. This helped push GBP/EUR rates to a 3 month high of €1.14 over the weekend. However as markets opened this morning, caution returned and we have seen things stabilise.

Will the Pound go up or down this week?

While last weeks news was positive, we’ve heard similar comments from EU negotiators before that are then contradicted, pulling the Pound lower again. A deal is still quite far away in my view, with lots still to be agreed. Even once the negotiators agree a deal, this still then needs to be voted through parliament in the UK, which will not be an easy task. Things certainly look more positive than they have done recently. While a ‘no deal’ Brexit is much less likely, a deal has not been agreed yet.

Any further developments about the negotiations this week may have a significantly impact on the value of the Pound. Further optimism could push the Pound up further. However given the 3% rise in recent weeks, I think any further short term gains will be limited.

What else could move the Pound up or down this week?

Putting Brexit to one side for a moment, we also have some important economic data releases this coming week. From the UK we have GDP, Industrial and Manufacturing production, and speeches by various BoE members that could impact interest rates. The EU and US also have economic data releases, and of course anything new about Brexit will also affect things.

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