The pound to euro exchange rate finished last week in a strong position, finishing the week above 1.19 on the interbank rate of exchange. The pound benefitted from the lack of any interest rate cuts by the Bank of England at their latest interest rate decision meeting.
Sterling also appeared to find some favour as the UK left the EU Friday night, as it underscored that yes, Brexit is happening and removed some of the uncertainty. The euro also lost some ground on Friday as the latest economic data for the Eurozone suggested weak growth of 0.1% for the region. France’s economy shrank by 0.1%, and Italy’s shrank by 0.3%, prompting concerns over what might lie ahead in 2020.
Looking to the week ahead, will the pound to euro exchange be likely to rise or fall?
Monday 3rd February is the beginning of a new month with a range of the latest UK and Eurozone economic data for investors to fret over. With the Bank of England voting 7-2 against an interest rate cut, markets will conscious of what data comes out and if the fresh optimism seen since the election, in terms of rising house prices, rising mortgage approvals and strong employment data, continues to paint a more positive picture of the UK economy.
This week will of course be important too because with the UK now having technically left the EU, (but remaining in the transitional phase where relations remain the same), markets will be key to understand better what lies ahead for Brexit.
Talks on future trading relations with the EU will receive attention, as will the possibility of the UK forging trade deals with other nations including the US, New Zealand and Australia, as well as Canada and Japan.
Brexit is happening and sterling is not suffering from any immediate worries, as any ‘cliff-edge’ no-deal moment is not until December 2020. With Ursula von der Leyen, President of the EU appearing very conciliatory in a speech last week, the potential for a trade deal and smooth future relations is there.
It is still too early to call Brexit a success or failure, and with the UK economy on the up and outperforming the Eurozone, plus the lack of any immediate fear of harm from a no-deal, GBPEUR interbank rates are higher.
Currency markets can however be fickle beasts with a short term memory problem, and whilst there is potential for this more buoyant mood and improvement to continue, the further unfolding of future events around Brexit, and both the UK and Eurozone economy will perhaps ensure a degree of caution and uncertainty remains which might well impact the rates further ahead.
If you would like to learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.