Pound to Euro exchange rate: Is the current Sterling spike justified?

Pound to Euro exchange rate Is the current Sterling spike justified?

Pound near month highs against the Euro

The pound to euro exchange rate has made gains following statements from Merkel and Macron regarding a potential Brexit deal. Macron said he was willing to listen to alternatives to the back stop and Merkel said a deal could be possible before the Brexit deadline, 31st October. Today’s trading has seen the GBP/EUR exchange rate reach highs of 1.0913 on the interbank exchange.

Some analysts are not necessarily convinced the GBP spike was justified, we are still some way from a solution. Some believe it is not in Brussel’s favour to let the UK leave with a favourable deal. If the UK were to leave with a decent deal what is there to stop other members of the bloc following suit? Italy, with huge debt, now in excess of it’s GDP could be a country that would like to leave the EU. They have also been threatened by the EU with a huge fine should Italy not make necessary arrangements to bring the debt into line. It could be the case that Brussels are making Brexit as difficult as possible in order to avoid a domino effect.

No deal outcome looks more likely

Boris has reiterated the UK will leave the EU in October with a deal or without one. At present the likelier outcome seems to be a no deal. Basically speaking, the higher the probability of a no deal the weaker you would expect sterling to become.

Until we have clarity on Brexit I am afraid the pound will remain fragile.

Just in case you are interested, I watched a YouTube video narrated by Steven Fry on why it may be in certain MP’s interest to leave without a deal. Check out the link here.

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