Pound to euro exchange rates have dropped to some of the lowest levels in 2-years as Brexit uncertainty over a no-deal threatens to undermine the value of the pound. Investors are avoiding and selling off the pound as the signals point to a no-deal Brexit.
Possibility of no trade deal in place with the EU hampers Sterling
The pound has been under real pressure because of the Brexit vote, this has been epitomised by the prospects of a no-deal, which has seen sterling drop in value. No-deal is disliked by the currency markets because it represents uncertainty over the UK’s future trading relationship with its biggest trading partner, the EU.
Sterling is now buying around 1.09 euros on the interbank exchange rate, putting pressure on any clients looking to buy euros with pounds. According to Rabobank, a Dutch bank, a no-deal Brexit could see GBP/EUR levels fall to parity or 1 for 1.
Rabobank predictions for Pound to Euro exchange rates
Upside prospects from Rabobank are linked to an extension beyond October which might see 1.15, whilst if a deal can be reached, they believe GBP/EUR might hit 1.20. This week however, the focus is on the no-deal prospects, plus the outcome from the UK’s latest interest rate decision which is due on the Thursday 1st August.
The worries over a no-deal are also weighing on the pound since it has an influence on UK interest rates. The pound might suffer in the future if it is felt that UK interest rates will fall. It is widely accepted that the lowering of interest rates will weaken the currency concerned, any indication of this on Thursday would by historical performance indicate a weaker currency.
The move through 1.10 is quite significant since the currency markets will have what are termed levels of ‘resistance’. This is a point where to break through the currency will need some extra news or event to trigger the move. The question now is with the GBP/EUR level having broken through this level, what will help it to rise back through?
To find out more about the latest news and events to move the currency market please contact myself Jonathan Watson to learn more about the latest outlook and new driving the levels.