Pound to Euro Volatility Expected – COVID, Brexit & US Election

Pound to Dollar Rate Pares Losses

The pound to Euro exchange rate starts the week on uncertain ground after the announcement on Saturday that England will now commence a second national lockdown this Thursday. UK Prime Minister Boris Johnson announced that the lockdown will last one month until 2nd December and is now required to help save the NHS over the Winter period. The number of coronavirus cases have now gone passed scientific advisers worst case scenario which has forced the government into this action now.

The announcement follows turmoil in the financial markets last week which saw the FTSE index fall by 4.8% hitting its lowest level in six months. There are fears of a double dip recession for the UK economy and this week may see high volatility as the country adapts to the latest developments. The question now is whether or not this period of lockdown will need to be extended to help stop the spread of the virus.

Cabinet minister Michael Gove said yesterday that the one-month lockdown may need to be extended further depending on how many confirmed covid-19 cases appear over that period adding another layer of uncertainty for the British economy and hence the pound.

On a more positive note for the UK last week saw mortgage approvals rise in September to their highest level since 2007 as buyers seek to take advantage of the government’s stamp duty holiday which will expire next year. Official data from the Bank of England saw mortgage approvals rise to 91,500 up from 85,500 in August suggesting a very buoyant UK property market for the time being.

The Eurozone is also seeing heightened market volatility as France and Germany both went into renewed lockdowns last week creating uncertainty for Euro exchange rates. The combination of lockdowns across Europe, the UK and combined with deep uncertainty over the US election held tomorrow is creating high market volatility.

Brexit meanwhile continues into the final days of intensified talks to try and find a solution to the thorny issues of the level playing field and fisheries which leaves GBP EUR in uncertain territory.

France is pushing the UK heavily for concessions on this topic and has hinted that a no deal will come out of this unless the UK is prepared to compromise.

European Affairs Minister Clement Beaune was on the Andrew Marr show yesterday and said that the UK and EU has just a few days to make sure that a trade deal is in place before the transition period ends.

In a sign of how the clock is ticking as the UK and EU go into national lockdowns he said “You cannot ask us to adjust to the Brexit choice on fisheries so let’s try to find a solution which respects both interests. I think it’s possible but we have a few days to reach it.”

Those with pending requirements would be wise to pay very close attention to the latest Brexit developments this week. With so much going on in the world with Covid-19, Brexit and the US election then any statements from either side from the Brexit talks could see a major shift in the pound to Euro forecast.

GBP USD Volatility – Election Tomorrow

The pound to dollar exchange rate as well as every major currency look set for high volatility with the US Presidential election upon us. A record turnout of up to million is expected on Tuesday and it has been reported that around 90 million people have voted early.

This weekend saw the last of the campaigning and where President Trump held four rallies in Pennsylvania, a state which has been dubbed the “Keystone state”. Even Nigel Farage has been brought out on the campaign trail who also helped him win at the 2016 election. Trump said on Friday when speaking at a rally in Waterford Township, Michigan “Biden will eradicate the economy, I will eradicate the virus and bring the economy back to where it was. He’ll deliver poverty, misery, depression. I will deliver jobs, jobs, jobs. I’ll make America great again, again.”

The polls have Joe Biden in front by some way but as history has shown us the polls are not always correct. Will Trump have the last laugh?

The New European reports that a Biden win would not be so welcome news for Britain, in terms of trade negotiations, and that Brexit could potentially be reversed. The statement is questionable considering Britain has already left the EU. Nonetheless whichever presidential candidate wins the race, that outcome will inevitably have consequences and perhaps unforeseen outcomes for the future of the United Kingdom.

At the last US election Hilary Clinton had secured an extra 3 million votes but because Donald Trump was able to win certain key states he was able to claim victory. Trump’s message remains – Trust me on the economy.

The financial markets are extremely nervous at present if the outcome of the election is a close result. President Trump has already made clear he will not leave easily if the numbers are not decisive. As Irwin Stelzer in the Sunday Times writes “All that will remain is for the authorities to get the countin’ done, as Kenny Rogers would have put it, and for the candidates to unleash their legal teams to challenge that countin’.”

Get in touch using the form below to discuss how these factors are likely to continue impacting the pound to euro exchange rate.