Pound to Euro Rate as EU Summit Discussions Continue

GBP EUR Exchange Rate: Week in Review August 28th

The pound to euro rate site lower at the start of this week with rates for GBP to EUR still trading below 1.10 after the decline seen on Friday. Rates for GBP vs EUR have touched a low of 1.0943 this morning. Reports are emerging that a deal could be in sight from the EU summit as soon as today as talks are now continuing into the 4th day following overnight discussions. So far from the EU summit this weekend there has been no breakthrough found after the Netherlands held its veto on how to distribute the proposed €750 million recovery fund. Even before the summit the Dutch Prime Minister Mark Rutte said “there was less than a 50% chance of an agreement this weekend.” German Chancellor Angela Merkel said “The differences are still very large and so I can’t predict that we will achieve a result this time. It would be desirable, but we also have to be realistic.”

The frugal five countries which include the Netherlands, Austria, Sweden, Finland and Denmark all seek to impose economic reform on the poorer EU countries in the South as a requirement for this substantial funding. Any announcements today that a deal can be found could help bolster the euro if investors view such news as positive for the economic recovery. Those looking to buy or sell euros with pounds would be wise to make contact and plan around this important development as there could be considerable market reaction on whether a deal is reached or not.

The British government has announced that it will drop the work from home if you can policy from 1st August and let businesses decide for themselves when employees should return to work. The government has done this in a bid to boost the economy and the new guidance wants to see employees and bosses discussing when that time should be. The government is effectively giving businesses the discretion to decide whether staff can work safely in offices. The hope is that if white collar workers start to return to offices and revert to previous habits, this could help spark the economic recovery. The government’s chief scientific adviser Patrick Vallance however has recommended that people continue to keep working from home.

This is all relevant in trying to determine the pound forecast as there remains deep uncertainty as to the economic hit from COVID-19 going forward and crucially whether or not there is a second wave of the pandemic in the Autumn

In the US last Friday there were over 70,000 confirmed new cases of coronavirus across the states of Florida, Texas and California. The news bodes badly for the US economy as Autumn approaches and the COVID-19 data coming out of the US will be closely scrutinised for clues as to how likely that second wave will be not just in the US but for every country across the globe.

Will Brexit Trade Discussions see the Pound to Euro Forecast Improve?

Intensive Brexit trade negotiations continue this week in the hope of finding a deal between the UK and the EU. Any further statements on the progress of these talks from UK or EU leaders are likely to carry volatility for the GBP to EUR pair. The last four years have shown how much of an impact the deal or no deal scenario can have on the price of sterling. As the UK transition period ends at the end of 2020 focus is on trying to reach a deal to keep trade moving as much as possible. However, there are growing concerns that a very basic or skeleton deal will be reached in the first instance. Both sides have serious issues to discuss and prioritise with the UK financial services sector playing a huge roll in this for both sides as well as the politically explosive topic of fisheries and what the level of access will be for EU vessels in British waters. With both sides currently so far apart on reaching a compromise the question is whether or not there is a further entrenchment of positions making a deal untenable. If, however a breakthrough is found with some commentators thinking the Autumn the most likely time for this to happen, there could be a material shift higher for the pound forecast. Brexit has kept pressure on the price of sterling ever since the referendum and has failed to ever return to levels before that time. We can reasonably expect high volatility as the transition period inches closer.