I wrote recently about the potential for GBPEUR interbank rates to get over 1.20, and lo and behold we have reached that milestone, the first time since December 13th. Sterling has benefitted from some improvements in sentiment, as a change of guard at the Treasury sees confidence over an infrastructure and spending plan that would boost the economy. Sterling made gains too against a weaker Euro, as signs the coronavirus was escalating and having a larger impact on Chinese factories than thought triggered concerns across the European automotive sector, that manifested in Euro weakness.
Sterling rose as the resignation of the UK Chancellor Savid Javid, saw expectations increase of a favourable budget by the new Chancellor Rishi Sunak, acting in the shadow of Boris Johnson and his senior advisor Dominic Cummings. The shock changes saw sterling rise as investors backed the new approach and predicted an increase in spending to help boost the economy ahead. In a similar way to how Donald Trump triggered a rise in the value of the US Dollar on his appointment and desire to reduce taxation, markets are predicting some more favourable times ahead for the UK economy.
Will GBPEUR Rise Higher?
This is in contrast to the Eurozone where the coronavirus concerns have seen the Euro weaker as investors await further news relating to the shutdown of many Chinese factories. Reports yesterday that a number of European car manufacturers including Fiat hit headlines warning of potential shutdowns in their operations. Europe is already on a finely balanced economic trajectory with European growth being outdone by the UK in 2019, a further slowdown ahead could put more pressure on the single currency and trigger more weakness.
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.