The pound to euro exchange rate had some troubles last week as investors saw no major reason to get behind the pound, and the interbank rate gently lost ground, finishing the week on 1.1775, having nudged 1.1852 as the highs. Expectations for this week are mixed, with the pound to euro rate having opened at 1.1762 this morning and not showing any immediate signs of wishing to move higher.
Some recent more impressive data for the UK with Services, Manufacturing and Construction all posting higher than expected gains last week, is being tempered by the prevailing uncertainty of a possible no-deal exit ahead. February has been the beginning of a new month with the UK having left the EU and the focus now very much on what type of trade deal the UK will ultimately enjoy. With Boris laying out that he wishes for a Canada style free trade deal, the potential for any alignment with the EU in the security of the single market or customs union is limited, and this has hindered any gains by the pound.
The currency market has been concerned about the potential for a no-deal exit hampering British trade, and even the prospect of being outside the EU’s single market or customs union is not generally supportive for the pound. With Boris and his team appearing very rigid in their determination to carve out a new relationship with the EU, the potential for further twists does exist, as the market has to grapple with putting a value on to what extent this will be a success.
The week ahead sees some important UK data releases, with UK GDP (Gross Domestic Product) data tomorrow and Eurozone GDP on Friday. Sterling has proved its sensitivity to the GDP data, having fallen last month as this number was closely linked to the potential for the UK to cut interest rates. November GDP was -0.3% which pulled the pound lower, it will be very interesting to see how the more recent data has been, to see if the potential for further declines will exist.
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.