The UK and EU are currently locked in trade deal negotiations as the December deadline approaches. Both parties have hit sticking points which include fishing rights and competition rules. Yesterday, negotiations took a pause after a member of the EU side tested positive for coronavirus.
This week, Brexit has largely driven the pound, with the currency rallying with any hint of news regarding a trade deal.
The pound to euro exchange rate will likely continue to be driven by Brexit developments “until a deal is done”, according to experts.
Today, the pound is currently trading at 1.1181 against the euro, according to Bloomberg at the time of writing.
This is above yesterday’s rate of 1.1175.
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Mr Vessey said Brexit and the news of successful vaccine trials has led to GBP seeing some gains.
He explained: “A combination of positive Brexit news, inflation data and the optimistic vaccine developments of late helped the British Pound extend recent gains yesterday, but concerns about surging coronavirus cases globally have capped pound traders’ enthusiasm.
“Sterling was upbeat this week, and a Bank of England policymaker interpreted markets as pricing in just a 20 percent chance of a no-deal Brexit.
“The recent positive vaccine news also drove demand for riskier assets, which tends to include the politically-charged pound.
“Helped by prevailing US Dollar weakness, GBP/USD climbed above $1.33 for only the eighth time this year.
“A week ago, the currency pair retraced to $1.31 after failing to maintain above this key resistance level and the already the $1.32 mark has nearly been challenged this morning.”