Since the start of the year pound to euro exchange rates have fluctuated 8 cents. To put this into monetary value a £200,000 purchase of euros would have generated clients an additional €16,000 if traded at the high compared to the low. Many of my clients that are purchasing property abroad want to know if the pound will rise or fall against the euro in the upcoming months? This question is impossible to answer, however I expect economic data to start to have more of influence than what we have seen in previous months.
Cross Party Brexit discussions continue, ahead of economic data releases from UK & EU
Since the start of the year the pound has risen against the euro when a deal between the UK and EU looked likely and then fell against the euro when a crash out Brexit gained momentum. A 6 month extension, has caused the pound to drop slightly against the euro and I expect in the upcoming weeks, UK Prime Minister Theresa May and Jeremy Corbyn will try come to a compromise however the Brexit negotiations may just drift into the background for the time being. A positive for the PM is that most of her Cabinet have shown support and want her to carry on until the first stage of Brexit is over.
Understanding the upcoming economic data for the UK and EU is important. In regards to interest rates both central banks have no plans to hike or cut anytime soon. The Bank of England continue to watch the ongoing Brexit negotiations patiently and will react when the time comes. The European Central Bank are starting their second long term Refinancing operation towards the end of the year, which means they will be lending underperforming banks cheap loans. I don’t see this as a positive event for the euro.
The upcoming weeks in the UK will be important. If more businesses start to state that they can’t wait another 6 months for decisions to be made and headquarters are moved from the UK, jobs could be lost, putting pressure on the pound. In addition manufacturing numbers in the UK have been performing well recently, however forecasters are suggesting this is because UK businesses have been stockpiling. If we see the manufacturing numbers start to slow again the pound could come under pressure once more.
My pound to euro forecast is for GBP/EUR to remain range bound between 1.13 and 1.18 in the upcoming quarter.
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