Pound to Euro Closes the Week at One Year Highs

GBPEUR Surges on Monday After Election Results

The pound to euro exchange rate has closed the week at the highest level since late-February 2020. The pound to euro rate has survived the latest UK Budget and will now look to the European Central Bank for direction on Thursday.

GBPEUR closed the week at 1.612 and the ECB will make its latest interest rate decision later in the week.

Stock Markets Close the Week Strongly

The FTSE closed at 6694 after markets had started the week in a tense posture, following the recent rise in bond yields. The US stock market was higher on the day after the latest jobs number in the country saw 379k workers added to the payroll, compared to the expected 182k. The unemployment rate also moved lower to 6.2%.

The British pound was helped by the Budget on Wednesday as Rishi Sunak raised rates as expected, but delayed that rise into 2022. Income tax rates are also being frozen into the 2026 fiscal year as the government seeks to plug their £400 billion hole created by pandemic spending.

Public sector borrowing was lower than expected, but the country saw its first January deficit. The The pound to euro exchange rate outlook now rests on the European Central Bank’s latest interest rate decision, which will come on Thursday. The ECB may look to increase the average of their weekly bond purchases to cool the recent rise in government bond yields.

UK and EU Involved in Another Trade Spat

It’s only a couple of months since the Brexit deal was signed by Boris Johnson, but another trade spat has emerged. The two sides were recently embroiled in a fisheries argument which saw the EU blocking shellfish exports to Britain.

A post-Brexit crisis is now brewing over Northern Ireland after the EU threatened legal action and pro-UK militants abandoned the 1998 peace accord, which has put the Brexit deal back in the balance. The EU Parliament has delayed the ratification of the Brexit and now a ‘crisis’ has appeared that may lead to them seeking to tear up the agreement. A return to Brexit-related instability would hurt sterling after seeing the risk premium from a No Deal outcome removed this year.

Pound to euro has support at 1.1500 and resistance at 1.1700 as the pound seeks to move to the 2020 highs at 1.2000. Speak to us to discuss your upcoming currency exchange and how it’s likely to be impacted in the coming weeks using the form below.