As the new trading week gets underway, GBP trades lower as the EU-UK trade negotiations get underway. Last week saw the pound rise against the euro after last week’s Bank of England (BoE) interest rate decision. The Bank of England announced that the cash rate would be kept at 0.75%. Investors panicked before the decision was made which saw GBP drop, but the positive news helped the pound restore its strength and then some. But as the trade talks begin, the pound has dropped as talk of a no-deal Brexit once again fills the airways. Meanwhile, for the euro, there has been signs of a struggle in the Eurozone economy which has worked against the single currency. The economy only saw a 0.1% growth in the final quarter of 2019. But with the BoE decision over with, the attention switches from the economy to the EU-UK negotiations which begin today.
GBP Benefits From the BoE’s Interest Rate Decision and Edged Over the Euro Last Week
Pound sterling starts its trading week on the front-foot against the euro. Sterling’s strength comes after the Bank of England (BoE) announced it would keep its interest rates steady at 0.75%. Investors worried that the central bank might cut the rates which provoked a mass flock of investors from the currency to safe havens like USD. But shortly after the announcement, GBP regained its strength and went on to hit close to 3-year highs against the euro. The outlook for the GBP in the short-term looks healthy as the chances of the BoE making a cut in the upcoming months looks a lot less likely after the decision. But with Brexit negotiations starting this February, the future for GBP looks unclear but any progression or regression during the talks will be likely to sway the currency.
Euro Slumped Against GBP as Sterling Performs and Eurozone Economy Stagnates but Brexit Negotiations See the Pound Fall Today
For the euro, recent trading has seen the currency drop as the Eurozone’s economic figures failed to impress. Last Friday afternoon saw the releasee of the official growth figures of just 0.1% in the final quarter of 2019. France and Italy both showed concerning signs of growth, whilst Germany’s economic data is yet to be released but will likely be the figure which receives the most attention. Germany is the Eurozone’s economic powerhouse and thus any signs of problems in Germany could spell trouble ahead for the euro. Wednesday will see the release of both services and retail sales data for the Eurozone, both have felt pressure recently so another poor data release could negatively impact the Euro. Uncertainty surrounding brexit negotiations have seen the pound fall out of favour with the market despite last week’s progress. The UK government seems stubborn in what it wants to achieve in the talks which has many wondering about the possibility of a no-deal brexit occurring if the two do not come to an agreement.
Today will mark the start of the UK-EU trade talks, both parties are poised to set out their initial negotiating positions. The UK PM Boris Johnson has already stated that the UK will not accept EU rules in order to make trade more fluid.
The pound to euro exchange rate is likely to be volatile as the negotiations get underway and the UK pushes for a free trade agreement.
If you have an upcoming currency transfer and would like to plan around Brexit or the BoE interest rate decision, feel free to contact me directly, Tom Holian, Using the form below. I look forward to hearing from you.