I am now quite concerned that the pound could lose value against the euro owing to some new potentially negative news which is on the horizon. Next week is the UK’s local elections on May 2nd, the same day as the Bank of England will release its latest forecast on inflation and interest rate decision. My personal view is that the pound could come under some pressure from these events and lose value against the euro.
I think the key point regarding sterling is that it is difficult to see where the pound will find a sharp increase in value from. Expectations are that the pound could rise if we do see Mrs May passing her Withdrawal Bill, however there does not appear to be much likelihood of this happening.
The various competing views on Brexit all seem to be digging their heels in and are appearing unwilling to compromise. I am now concerned that the local elections will only contribute further to the feeling that Theresa May’s role could be under real pressure and she might be forced to resign.
The Bank of England have been notable in their negative commentary over Brexit and whilst the UK economy is performing quite well, there is also a worry that longer term the lack of certainty is damaging long term investment in the UK.
Will the euro weaken?
The euro could well weaken in May with the latest European elections due for the 23rd May, there has been a growing concern that the rise of more far-right parties will only weigh on confidence in the region.
The euro has been struggling too, owing to the concerns of the trade wars and the potentially negative effects on the global economy. The eurozone has suffered at the hands of a worse outlook for the global economy, with investors worried a slowdown globally will harm the European automotive industry, which is a major factor in the eurozone economy, representing around 7% of growth.
I suspect that whilst the euro might weaken, sterling is likely to be under more pressure and I would not be at all surprised to see GBP/EUR levels trading in the 1.14’s but even possibly in the 1.13’s. Any major euro weakness and signs of the UK exit deal being secured would however change the picture and could easily see the 1.17-1.18 range being revisited.
The next week and early May is shaping up to be a very busy period for pound to euro exchange rates. If you have a currency exchange to consider and wish to discuss the latest news and strategy, please do not hesitate to get in touch to learn more.
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