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Euro Rates Today: EUR/GBP Hits Highest Since Mid-January

Market CommentaryEuro Rates Today: EUR/GBP Hits Highest Since Mid-January
Euro Rates Today: EUR/GBP Hits Highest Since Mid-January
Euro Rates Today.

If you intend to transfer money to the UK from the Eurozone in the near future, it may interest you to know that the euro rates today have reached a 20-week high.

To be specific, the euro to pound interbank exchange rate has hit 0.8888 at the time of writing, its strongest since January 15th, close to the start of this year.

This might interest you, if you're a Brit with a holiday home in Spain, France or Italy, and you're planning to sell your property abroad.

Alternatively, this could be helpful information, if you're a Eurozone citizen, and you're thinking of emigrating to the UK, to find work and settle down.

This is because, by contrast, back on May 4th, the euro was as weak as 0.8493 versus British sterling. So in the month since, the EUR has risen by close to +4 cents against the GBP, or by +4.65%.

So when you transfer money to the UK, you might now get a higher total in your British bank account, compared to the recent past.

To contextualise this increase in the value of the euro versus the pound for you, at today's interbank exchange rate of 0.8888, €250,000 would be worth £222,200.

By contrast, at the interbank exchange rate on May 4th of 0.8493, €250,000 would have been worth just £212,325. So for the same euro amount, that's a rise in the pounds sterling total of +£9,875.

A first reason why the euro to pound interbank exchange rate has reached this 20-week high is because the odds have risen that ex-Former Secretary Boris Johnson will become Prime Minister.

Mr. Johnson has pledged to take the UK out of the EU by October 31st, even without a deal. However, it's worth noting that the UK economy remains stronger than the Eurozone's.

Let's take a look at these factors why the euro rates today have strengthened. You might find this helpful, for when you transfer money to the UK from the Eurozone this year.

Euro Gains Versus Pound, as Boris Likelier to Become Prime Minister

As I mention, a first partial explanation why the euro to British pound interbank exchange rate has reached this 20-week high is because former Foreign Secretary and Mayor of London Boris Johnson now looks likelier to become the next Prime Minister, replacing Theresa May.

According to Oddschecker, the odds of Mr. Johnson becoming Prime Minister have shortened from 7/4 to 6/4.

In particular, Mr. Johnson looks likelier to win the Conservative Party's upcoming leadership contest, because he's pledged to take the UK out of the EU by the extended deadline of October 31st, with or without a deal.

Speaking in his campaign announcement video yesterday, Mr. Johnson said: "If I get in we'll come out deal or no deal on October 31. We'll do that”, reports Forex Live.

Mr. Johnson's pledge has raised the odds that he'll win the Conservatives' leadership contest, because a majority of Conservative members and many Tory MP favour a 'No Deal'.

For instance, the ex-Mayor of London now has the support of 35 MPs, ahead of Environment Secretary Michael Gove's 26 MPs, or Foreign Secretary Jeremy Hunt’s 24 MPs.

However, if the UK exits the EU without a deal, we'd be severing ties with our closest trade partner. In turn, this could weaken the UK's future economic growth.

This possibility worries both the financial markets and UK investors. So the rising probability that Mr. Johnson will become the next Prime Minister has contributed to weaken the value of the pound.

EUR to GBP Rate Rises, as Support for Tories and Labour Falls

In addition, a second reason why the euro to pound interbank exchange rate has reached this 20-week high is because the UK's leading Conservative and Labour Parties have lost support, says the latest survey.

According to trusted pollsters YouGov, both the Tories and Labour are now behind both Nigel Farage's Brexit Party, plus the Liberal Democrats, who're in first place.

This has contributed to weaken sterling, because if a general election were held in the near future, this YouGov poll data would point to complicated results.

In particular, to form a majority government, Labour would have to enter a coalition with the Lib Dems, while the Tories and Brexit Party might have to join forces. This adds to the UK's political instability.

What's more, it looks increasingly possible that a general election could be called. This is because, if Boris Johnson becomes the next Prime Minister, Parliament would likely call a vote of 'No Confidence' in Mr. Johnson's government.

This would be to prevent Mr. Johnson from taking the UK out of the EU without a deal. After all, a majority of MPs favour reaching an agreement with the EU.

However, if there's a general election, the UK might have to further extend its Brexit deadline, beyond October 31st. What's more, it's possible that Jeremy Corbyn's Labour Party could win the election, creating an additional complication for the UK's Brexit talks.

As a result, this uncertainty has helped lift the euro versus the pound, up to this 20-week high.

UK's Economic Strength May Affect Euro Versus Pound

However, that said, the UK's continued economic strength versus the Eurozone could affect the value of the euro versus the pound, looking ahead.

In particular, if UK GDP (Gross Domestic Product) growth continues to outpace the Eurozone's, this might encourage global money managers to buy British assets and invest in the UK, thereby influencing the value of the pound.

To be specific, UK GDP expanded by +1.8% in 2018, according to the Office for National Statistics. This is well ahead of the UK's main economic rivals in Europe, where for example, Italy grew by 0.1%, Germany by 0.7%, and France by 1.1% last year.

Also, UK unemployment stands at 4.3% at present, its lowest since the mid-1970s, while joblessness in the Eurozone remains close to 10% at the time of writing.

A factor why the UK economy is growing faster than the Eurozone is because US President Donald Trump has specifically targeted Europe in his trade war.

For example, Mr. Trump has accused Germany of running an unfair trade surplus with the USA, and threatened to impose tariffs on the EU's car industry. This has hurt Germany's business confidence and exports.

In addition, given that the UK economy is growing faster than the Eurozone's, it's possible that the Bank of England might hike interest rates in the near future, above their current 0.75%.

By contrast, the European Central Bank (ECB) is set to keep interest rates at all-time lows of 0.0%, to stimulate the Eurozone's economy, given the uncertainty over Mr. Trump's trade war.

With this in mind, even with Brexit, the UK economy looks fighting fit compared to its continental neighbour.

This might encourage international businesses to choose the UK to expand, and the Bank of England to raise borrowing costs. Looking ahead, these factors might influence the value of the euro versus the pound also.

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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