Pound to Euro forecast: How could the latest Brexit extension affect Sterling exchange rates?

Pound to Dollar Rate Drops to One-month Low

The pound to euro exchange rate had risen slightly late yesterday on the interbank market with rates currently sitting at 1.1561, at one point rates were as low as 1.1533, its weakest in over one week, or since Wednesday 17th October. Yesterday, the EU announced that it will extend the UK’s Brexit deadline, yet will only decide by how long early next week, once the UK Parliament has decided whether to hold a general election.

Boris to call for election next week, will Corbyn support him?

Next Monday, UK Prime Minister (PM) Boris Johnson will try to call a general election in the House of Commons. According to the UK’s Fixed Terms Parliament Act, the UK can only hold a general election every five years, unless 2/3rds of MPs vote otherwise. So, the PM needs the support of the opposition Labour Party to call an election.

Yet Labour’s leader Jeremy Corbyn had hoped to remove the possibility of a ‘No Deal’ Brexit, before voting for an election. So, we’ll see what Mr. Corbyn decides. Historically during general elections, the currency involved experiences volatility due to the political uncertainty, you could therefore expect news of an election to influence the pound to euro exchange rate.

If UK holds election, Brexit extension may be three months

If the Labour leader decides to vote with PM Johnson, then the EU will likely grant the UK a three month Brexit extension, to January 31st.

In this case, it’s thought that the UK will go to the ballot boxes in early December, for Britons to decide which political party will deliver Brexit.

In particular, PM Johnson will wish to regain his lost Parliamentary majority, to pass his Brexit deal, whilst Jeremy Corbyn may try to push through a second referendum. The extension to the Brexit deadline could see sterling soften, as the uncertainty over the outcome of Brexit intensifies once more as the country heads to the polls.

If MPs vote down election, Brussels may grant two week extension

Alternatively, if MPs decide not to hold an election, then the EU may decide to extend Brexit by just two weeks, to mid-November, as France’s President Emmanuel Macron prefers. Mr. Macron wants to put pressure on Parliament, to approve Brexit and start negotiating the future trade deal.

However, if Brussels is seen to be interfering in the UK’s domestic politics, this could encourage MPs to reject the Brexit deal, with just a few days to avert an accidental ‘No Deal’. If you have interest in the GBP/EUR rates, there’s lots of possibilities for Brexit ahead, news next week will offer some insight into the direction of the Brexit and UK politics, affect the value of sterling.

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