Now that the Brexit negotiators from both sides of the Atlantic have had a few weeks off to reflect on the progress made in July, UK negotiators are on route to Brussels this morning to resume the Brexit negotiations. Chief EU negotiator David Frost told the media that he believes a deal could be reached in September, which would be in time for a deal to be signed off at the EU October summit. However Chief EU negotiator at the end of July suggested that it is still likely that the UK will crash out of the EU without a deal.
Over the last 3 years the pound to euro exchange rate has been extremely sensitive to Brexit related news. Positive news that sees the UK one step closer to a deal tends to strengthen sterling and the euro, however any news relating to crashing out of the EU tends to see sterling lose value against the euro. Now that we are approaching the Brexit deadline, I expect we could see major volatile when we find out how the negotiations pan out. If you are looking to convert pounds into euros feel free to get in touch to discuss your options.
UK Economic Data to Look Out for This Week
This week, UK inflation is set to be released at 07:00 on Wednesday. UK inflation steadily decreased throughout the UK’s time in lockdown as the demand for goods and services fell which meant that business owners had to lower their prices. Now that the UK economy is close to business as normal, July release will be watched closely by investors. If prices have started to rise once more this can only be a positive for sterling however if inflation falls further, we could see the Bank of England stance regarding negative interest rates change causing sterling to lose value.
Later in the week Retail sales and PMI data will be released Friday. Retails sales have shown a major bounce back over the last 2 months which has been a positive for the UK. UK consumers have found a way to purchase goods and services online or even flocking back to the high street. Fridays release is set to be released at 2%, down from 13.9% in June. Later that morning PMI will be released, and a slight increase is expected. PMI measures the economic situation within the service sector and as 4/5 of the UK economy is made up of the service sector this release should be watched closely.
US Dollar Demise Causes Euro to Remain Strong Against Sterling
Since the middle of March when countries went into lockdown, the stock market crashed and investors flocked to the safe haven US dollar, week by week the US dollars have been losing ground against most major currencies but in particular the euro and sterling. EURUSD is the most traded currency pair globally and we have seen a 11% increase. With the euro strengthening against the dollar, this also means the euro remains strong against sterling. For clients that are with an international payment to make involving the pound to euro exchange rate, developments in the US should be watched closely in the upcoming months.
At present 50,000 cases a day of COVID-19 are still being reported which is worrying for the UK and the economy. With many health professionals suggesting that the virus could spread more in the winter months, the US will need to continue to monitor the numbers closely. If we see further state lockdowns, that will have a major impact on unemployment and therefore consumer spending, something the US heavily relies on. In addition, it appears that the US election is going to be closely fought, with Donald Trump narrowing the gap against his rival, Joe Biden. Closely fought elections tend to put pressure on the currency in question, therefore if the dollars continues to devalue, we could see the euro perform well against sterling.
If you are looking to buy or sell euros in the upcoming weeks because of your business requirements or the purchase/sale of a property overseas feel free to get in contact by filling in the form below and I will personally give you a call to discuss your FX requirements.