Before the UK decided to shut down most of the economy earlier in the year, the pound was performing well against the euro with exchange rates above 1.20. However, a sharp sell off of GBP led to the pound to euro rate plummeting to the 1.05 territory. When a currency is sold so dramatically and therefore becomes extremely cheap you tend to see it purchased once more which materalised and ever since the pound has been trading in the lower teens against the euro.
An Important Month For GBPEUR Exchange Rates
Now that UK Prime Minister Boris Johnson has started to ease lockdown restrictions, allowing some children back to school and consequently their parents back to work, the pound has started the week in a positive fashion. Throughout Monday’s trading session the pound made a 0.85% gain against the euro, however the movement yesterday was minimal. As we see further relaxation of the lockdown measures put in place in the weeks to come, allowing more people back to work, it will mean few people paid via the government’s furlough scheme, which can only be positive for the pound. However the leader of the opposition Kier Starman today has told the Prime Minister to ‘get a grip’ regarding the easing of the lockdown as Labour fear a second wave. I think it’s important to recognise that a second wave for any country could have a devastating effect on the economy and therefore the currency.
Brexit to Take Centre Stage Once More
This week UK and EU negotiators are back at the negotiating table trying to thrash a trade deal, and so far the reports we have received have been mixed. It was only 2 weeks ago Chief EU negotiator Michel Barnier was telling the media that the UK are not prepared to negotiate and that he therefore didn’t feel like a deal was likely. However, on the same day Michael Gove told the press that a few issues needs addressing but he was happy about the way the negotiations were unfolding. By the end of the week we should find out more in regards to how the negotiations went this week before an important EU summit in Brussels on the 19th June.
The agenda for the EU summit will be set a week before the meeting, and EU COVID-19 rescue package will be a main talking point, but so will Brexit. The UK’s deadline for a Brexit negotiation is at the end of June, therefore the messaging that the EU give at this summit is going to be extremely important, and is likely to have a major impact on pound to euro exchange rates. If at the end of the month negotiations are still stagnant, with Boris Johnson announcing that the UK won’t take up the extension, history tells us that this wouldn’t bode will for the pound and we could see the pound drop in value against the euro.
UK Interest Rate Decision
Also on the 19th of June is the UK interest rate decision. With interest rates at rock bottom due to COVID-19 the only other option is for the Central Bank to push interest rates into negative territory. Last month there was some talk of this floating around the market, however the Bank of England announced that is was being reviewed but nothing had been decided. The Central Bank did sell government bonds last month through at a negative interest rate for the first time in history. The reality of it is that the Bank of England will not want to penalise people for trying to save, however they will have to react to the conditions put in front of them due to COVID-19.
Are you Converting Pounds into Euros or Euros into Pounds?
The events that are set to unfold throughout June I expect could make the market volatile, which therefore could provide opportunity for clients to save money but at the same time waiting until the end of the month could be costly.
If you are making a currency transfer, feel free to get in contact by filling in the form below and I will personally contact you to find out more about your requirements, and can monitor the market for you and provide you information as the events unfold in a bid to help you save money on your currency exchange.