The pound euro exchange rate has been trading in a very tight range during the last two weeks as the markets appear to be adopting a wait and see approach. This weekend was the first time since March that pubs have reopened as well as hairdressers much to the excitement of many across the country. It appears the news was overall positive apart from the odd flare up according to police which comes as no surprise. With the UK economy now having overcome another obstacle with reopening part of the leisure and tourism industry, it will be interesting to see what the response will be in terms of the economy when the data is measured in a month from now. In terms of the short-term impact on the pound sterling forecast, it has made little impact so far on exchange rates.
The over-riding influence upon Sterling and the pound to euro forecast is likely to remain focused on the ongoing Brexit talks.
The UK’s chief negotiator David Frost has stated that there are a ‘number of different issues’ between the two sides which are still to be cleared up. The European Union has asked for more of a level playing field as well as the UK working in parallel with the EU.
With face to face talks having once again started could we be seeing more progress in the weeks ahead. Rumours are that increasing that if a deal is to be done it needs to be close to conclusion by September in order for many companies and industries to be ready for the changes.
One of the main problems for the strength of Sterling exchange rates is that of the uncertainty caused by Brexit. We are now over four years since the original vote back in June 2016 and little has moved forward since. With less than six months to go before the current deadline there is still a risk that the UK could leave with a ‘no-deal’ Brexit and that is something which is weighing heavily on Sterling at the moment.
In the meantime the government has announced plans to support the UK’s economy by introducing a ‘stamp duty holiday’. The plans include increasing the starting price for stamp duty to be paid from £125,000 to £500,000. This is expected to take place in the Autumn Statement. Chancellor Rishi Sunak has also announced another round of plans to invigorate the economy including a short term cut in VAT for pubs, cafes and restaurants in a bid to support the sector which employs almost 2.5 million in the UK.
Over the weekend the government confirmed that they have announced a £1.87billion package including loans and grants in efforts to support the arts sector which at the moment have little chance of reopening in the short term.
Will the Euro Weaken?
Over the weekend, the president of the European Central Bank Christine Lagarde held a webinar covering the recent period for the Eurozone. Lagarde stated ‘the inflation dynamic will necessarily be impacted, probably with a disinflationary, deflationary aspect at first, then inflation dynamic.’
The Eurozone acted promptly on the continent with a huge amount of money ploughed in to the economy and with interest rates below zero it will be interesting to see if the measures taken place have been enough to support the euro.
Eurozone retail sales are release at 10:00 this morning and they cover May for both month on month and year on year figures. The expectation is for a monthly increase of 15% compared to the month before. The huge jump should come as little surprise as during the Eurozone was fully in lockdown. This data could see GBPEUR exchange rates move later this morning as it will be one of the indicators as to how quickly the recovery may be for the Eurozone.
There is little data out for the Eurozone in terms of economic data so expect to see movement depending upon the sentiment surrounding the Brexit talks in London this week.
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