The pound to euro interbank exchange rate rose to over a one-month high last week, breaking 1.19 on the interbank rate. Investors were encouraged by strong economic data from the UK last week reflecting a rise in the number of people employed in the UK, to a record 76.3%.
The pound has been lower in 2020 after expectations of an interest rate cut from the Bank of England caused investors to sell off the pound. This threat was largely removed last week with the stronger than expected UK data. Looking forward to next week it will be interesting to see how if this sentiment is maintained. If the lack of clarity in the direction of sterling so far this year is reviewed, expectation for another potential week of shifting sentiments may be necessary.
Crucial Week For Pound Sterling
The week ahead could be vital for the pound to euro exchange rate as we have two events of high importance, in the form of the latest UK interest rate decision by the Bank of England, plus the Brexit exit date of January 31st.
Expectations around these events could see the pound being bought and sold, thereby driving volatility on the pound to euro exchange rate. A key point is the Bank of England decision on Thursday lunchtime, this event has been causing movement on the pound this year and whilst expectations of a rate have diminished last week causing the pound to rise, any further commentary on this by the Bank of England Monetary Policy Committee may be of high interest to the market.
The Brexit exit date is not so clear cut as a market moving event, but it is nonetheless symbolic in that it represents the UK leaving the EU. The UK will from February 1st leave the EU, and enter the transition phase where all existing rights and obligations remain. Focus will then undoubtedly shift to the trade talks between the UK and the EU, and the UK and the rest of the world, and with it the possibility of new news events to influence the strength of the pound.
With no-deal still a possibility if the UK has not reached agreement on a future relationship with the EU by the end of the year, sterling may still find itself under pressure. The week ahead could be pivotal for the pound with two key news and economic events at the end of the week, if you have a transfer to consider then please do get in touch to discuss the news and the markets further using the form below.