Pound-Euro Week Ahead Forecast: Market Still Hopes for a Brexit Breakthrough

The Pound-to-Euro exchange rate slipped by a fraction last week in price action that may belie the true extent to which 'no deal' Brexit risk has risen, but with a boy who cried wolf so many times before still in 10 Downing Street, investor indecision may now ensure Sterling remains range-bound over the coming days.

The British Pound maintains a technical uptrend against the Euro that is supportive of a view that further gains can be eked out in the near-term, particularly if the fundamental backdrop concerning Brexit trade negotiations remains cautiously constructive.

The British Pound is forecast to remain under pressure against the Euro over coming weeks by Natwest Markets, citing Brexit trade negotiations that won't conclude anytime soon and expectations for the UK economy to remain unattractive to international investors.

The Pound-to-Euro exchange rate fell by 0.40% last week, eating away at the 0.70% gain recorded in the week prior, confirming this to be a market that is consolidating.

The British Pound has endured another volatile 24 hours as investors react to headlines on the state of Brexit trade negotiations which are now being tipped to extend into November, with the latest news concerning fisheries negotiating putting the currency on the back foot in midweek trade.

Foreign exchange analysts at Goldman Sachs see value in buying Pound Sterling against the Euro in anticipation of the EU and UK striking a Brexit trade deal in coming weeks, while foreign exchange market options pricing suggests a market becoming increasingly of the view the two sides will strike a Brexit deal.

The Euro-to-Dollar exchange rate has jumped 0.5% at the start of the new week to reach fresh two-week highs at 1.1786, amidst an atmosphere of broad-based Dollar weakness amidst evidence of a clear outcome to the U.S. November presidential vote.

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The Pound-to-Euro exchange rate is in recovery mode and could be on the cusp of a Brexit-inspired breakout from its recent range, but will have to overcome technical resistance and contend with deteriorating risk appetite this week.