Pound to Euro Under Pressure; When Will this Improve?

GBP EUR Higher After French Economy Shrinks

The pound vs both the euro and the US dollar has been dropping slowly during the last fortnight and continues to remain under pressure.

The pound to euro rate dropped by two cents, and the pound to US dollar by over four cents during the last 2 weeks..

The UK is currently ranked as the 3rd place on the planet affected by Coronavirus and although the Bank of England kept interest rates at an historic low of 0.1% the central bank added an extra £100bn worth of bond buying in an attempt to stabilise the British economy.

Prime Minister has claimed that the two metre rule is under review and there are suggestions that this may be changed in the very near future which will give some positive news to the leisure and tourism industry which has claimed it would only be able to operate at 30% of it potential if the rule remains the same. If the rule is changed to one metre then the restaurant and pub industry in particular have claimed they will be able to reach 70% of their revenue which makes opening them again viable.

The real concern for the next week will be the ongoing topic of Brexit. Michael Gove has previously claimed that the UK will continue its current stance with no request for an extension. With just over a week before the UK can decide whether or not to ask for an extension we could see a very volatile end toe the month in terms of Pound Sterling exchange rates especially if the UK government perform a U-turn and ask for an extension.

If no extension is requested then the UK will have until the end before it leaves the European Union officially so we could be in for a very tense few months ahead in order to agree a deal between the two parties.

UK Economic Data

Turning the focus back towards the UK’s economy and there were a number of reasons to be positive last week. UK unemployment rates came in line with expectation and although clearly worse than what we have seen prior to the lockdown it will be the impact of the end of the furlough scheme when we see the real cost to the economy. In October the government will cut the level from 80% to 60% with companies then having to choose whether to top up the salaries of employees are look at redundancies. Therefore, in terms of the unemployment levels it may not be until later in the year when we witness the real impact of the lockdown period in the UK.

UK GDP has already contracted by over 20% according to recent reports but with the UK announcing we have moved to phase 3 in terms of coming toward an end of lockdown then could we see the Pound starting to make some gains once the UK economy gets back toward being open for business once again?

Tomorrow morning brings with it the latest news surrounding the UK Purchasing Manager’s Index (PMI) data. The expectation is for it to come out at 40 which will be an improvement on last months’ figures of 29. Anything above 50 represents growth in the sector so although a lot lower than this figure any improvement is good to see.

There are also rumours surfacing that the UK is considering cutting VAT rates which is what happened following the credit crunch. This effectively encouraged spending so combined with interest rates at their lowest in history could the UK spend itself toward a recovery?

If you have a currency transfer to make and would like a free quote, or to discuss the above factors then contact me directly, I look forward to hearing from you.