The sterling vs euro interbank exchange rate stands at 1.1803 today at the time of writing. This is very close to its recent high of 1.1811, reached this Tuesday 7th January.
By comparison, back on Monday 6th January, the pound was as weak as 1.1705 against the Eurozone’s common currency. So it’s since strengthened by close to one cent, or by 0.84%.
Sterling stands steady versus the euro on the interbank market, in part because yesterday new European Commission (EC) President Ursula von der Leyen said that the UK and EU can reach a partial new trade agreement by the end of 2020.
Speaking in London before she met Prime Minister Boris Johnson at Downing Street, President der Leyen said that:
"The more divergence there is, the more distant the partnership has to be. And without an extension of the transition period beyond 2020, you cannot expect to agree on every single aspect of our new partnership. We will have to prioritise.”
Pound Supported, as der Leyen Compromise Avoids Cliff Edge
This has strengthened the pound to euro interbank exchange rate, because recently, PM Johnson legislated a deadline of December 31st 2020 to finalise the UK/EU future trade agreement.
This risked created a new Brexit cliff-edge, if the two sides couldn’t make a deal by the end of this year, in turn potentially weighing down the UK’s economic growth in 2020/1.
However, President der Leyen’s approach suggests that the EU will respect PM Johnson’s deadline, by prioritising the trade elements to be agreed this year, and leaving the rest for later. This avoids the cliff-edge, thereby supporting the GBP to EUR interbank exchange rate.
Sterling to Euro May Be Affected, as Trade Talks to Start in February
That said, it’s useful to note that, although PM Johnson and President der Leyen met in Downing Street on Wednesday, the UK/EU future trade talks have not yet begun in earnest.
First, the EU’s 27 member states must agree a trade mandate, to give to their Chief Brexit Negotiator, Michel Barnier. It’s expected that this will take until mid-February, in which case the negotiations will begin fully in March.
Yesterday, Mr. Barnier said that "In London I met Boris Johnson & looked at the year ahead: negotiating a new partnership but, as the President said, it will not be as close as now." This could affect sterling’s value in the coming weeks.
GBP to EUR Stable, as Germany’s Economy Mixed in November
In addition, the sterling vs euro interbank exchange rate has also been supported, because recently, Germany’s latest economic data has been mixed. This week, we’ve learnt that Deutschland’s exports fell by 2.3% in November, beyond forecasts for a 0.5% decline, although industrial production surprisingly increased by 1.1%.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or Contact Us.