The pound to euro interbank rate broke the 1.20 level last week for the first time since the 13th December, as markets became more excited about the UK’s financial prospects ahead and the Euro lost value on coronavirus concerns. The UK Chancellor Savid Javid resigned following conflict with other members over his direction, the pound strangely benefitted from this, since it is expected his successor Rishi Sunak is predicted to be more tolerant of allowing a spending program, as wished for by Boris Johnson and his team. The pound rose against the Euro to over 1.20 on this news as it indicates a stronger economic outlook ahead and increased investment in sterling assets.
Sterling had been lower on previous concerns relating to the fears regarding a no-deal Brexit, but with the UK currently outperforming the Eurozone in economic growth terms, it is easy to see why the pound has been rising against the Euro. The UK grew faster than Italy, France and Germany in 2019, and with economic news improving at times this year, the outlook might be more positive too. This sentiment was given an extra boost by the expectation that the new Chancellor will be looking at a very pro-business and pro-spending budget, that will further help the UK economy.
Looking further ahead in the future, the concerns over the coronavirus might still be an issue, with the market trying to better understand just what lies ahead. The Euro has suffered on this topic as European automotive firms reliant on Chinese factories are in the spotlight, the knock-on effect from this might be that European growth suffers, and the Euro too with it.
Next week sees UK Unemployment, Inflation, Retail Sales, against Eurozone Inflation data and also business surveys for the Services and Manufacturing sectors, all of which might be market movers for GBPEUR rates. GBPEUR interbank rates did rise above 1.20 but have dipped back below as we head into the weekend. Whether the testing of the 1.20 last week was a short term opportunity, or part of a bigger mover higher will soon become more apparent.
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.