The euro to pound interbank exchange rate has hit 0.9305 in the past day. This is less than a penny, or -0.95%, beneath the euro’s recent 10-year high versus sterling, its strongest since January 19th 2009, reached last Sunday, of 0.9395.
By contrast, back on May 6th this year, the euro to pound interbank exchange rate was as weak as 0.8505. So the Eurozone’s common currency has since strengthened by over eight pence, or by +9.4%.
The euro has now strengthened versus sterling for 14 consecutive weeks. This is the euro’s longest-winning streak against the pound since the euro was created, back in 1999.
Back in December 2008, the common currency reached 0.9714 against the pound, its all-time high. So at today’s interbank exchange rate, the EUR to GBP is just -4.39% below this point.
This could be of interest to you, if you’re a Briton living in Spain or France, making regular payments to your family and friends in the UK, or a European citizen studying abroad in Britain.
This is because, when you transfer money to the UK from your Eurozone bank account, you might now get a higher pound sterling total, compared to if you’d bought pounds in the past 10 years.
In turn, this might increase the sterling total that your family and friends in the UK receive when you send them regular payments, or cut your currency for tuition fees to study in the UK.
To stay up-to-date with the euro to pound interbank exchange rate, simply visit Pure FX’s Rates & Tools page. Here, select ‘EUR’ to ‘GBP’ to see the interbank exchange rates for the last week.
Also, to find out what’s influencing the value of the euro against the pound recently, visit our EUR to GBP Exchange Rate Updates page. Here, click on the newest article to read the news.
A first reason why the euro to pound interbank exchange rate has neared this 10-year high today is because it remains very likely that the UK will exit the EU without a deal, say new reports.
However, looking forward, the value of the euro against sterling could be affected, if MPs oblige Prime Minister Boris Johnson to request an extension to Article 50, as they’re planning to do.
In addition, the euro to pound interbank exchange rate might also be influenced, looking forward, because Italy’s populist coalition government looks increasingly close to collapse.
Please find below a further explanation of these factors that have strengthened the euro against the pound, as well as what might affect the value of the EUR to GBP, in the foreseeable future.
Euro to The Pound Today Strengthens, as ‘No Deal’ Brexit Looks Very Likely
As I mention, a first reason why the euro to pound interbank exchange rate has neared this 10-year high today is because it’s increasingly probable that the UK will exit the EU without a deal, by the end of the extended deadline of October 31st, according to the financial markets.
There are concerns that, if the UK achieves a ‘No Deal’ Brexit, the UK’s economic growth could decelerate in future.
The UK looks increasingly likely to opt for a ‘No Deal’ Brexit, because new Prime Minister Boris Johnson’s government is seemingly aiming for this.
After all, Mr. Johnson has committed the UK to exiting the EU on Halloween “come what may, do or die”, “no ifs, no buts”, even though he’s also refused to ratify the draft Brexit agreement, unless the EU abandons the Northern Irish backstop, reports the Financial Times.
Mr. Johnson refuses to support the draft Withdrawal Agreement that ex-Prime Minister Theresa May negotiated with the EU, in particular because of the backstop.
The backstop states that, if the UK and the EU don’t agree a future trade deal, then Northern Ireland will remain in the EU’s Customs Union. This is to ensure that there’s no hard border on Ireland, to preserve peace there.
However, a consequence of Northern Ireland’s staying in the EU’s Customs Union to protect peace is that this would constitutionally separate Northern Ireland from the rest of the UK.
So to protect the UK’s constitutional integrity, all of the UK would have to stay in the Customs Union, even after Brexit. According to Mr. Johnson, this would reduce the UK to an EU “vassal state”.
The EU refuses to abandon the backstop because, as I say, it’s necessary to preserve peace in Ireland. The border infrastructure between Northern Ireland and Ireland was dismantled, as part of 1998’s Good Friday Agreement.
This put an end to decades of sectarian violence, including IRA terrorist attacks. The EU says that these gains can’t be risked, even though the UK is leaving the EU.
The thing is though, what with Prime Minister Johnson refusing to ratify the existing Withdrawal Agreement, and the EU refusing to change it, London and Brussels now stand at stalemate.
The clock is ticking down to the UK’s Brexit deadline on October 31st. The UK’s default legal position is that we’ll exit the EU that day, with or without an agreement. So this growing possibility is weakening the pound.
EUR to GBP Exchange Rate Rises, as Options to Stop ‘No Deal’ Brexit Running Out, Says IfG
In addition, another reason why the euro to pound interbank exchange rate has neared this 10-year high today is because, even though a growing number of MPs want to stop a ‘No Deal’ Brexit, their options to do so are running out.
This is according to a new report by the respected Institute for Government (IfG) last weekend. The IfG’s report has also contributed to weigh down sterling.
Since it became apparent that Prime Minister Boris Johnson could seriously take the UK out of the EU without a deal on October 31st, MPs in the House of Commons have come up with various plans to prevent this.
These include holding a vote of ‘No Confidence’ in Mr. Johnson, in which case he’d be bound to resign, or ensuring that Parliament is in session leading up to October 31st.
However, though there’s growing Parliamentary resistance to Mr. Johnson’s willingness to achieve a ‘No Deal’ Brexit, MPs options are running out, said a respected new report this weekend, reports The Guardian newspaper.
According to the Institute for Government, an independent thinktank focused on UK government procedure, MPs will have to be increasingly “creative”, to stand a chance of stopping ‘No Deal’.
The IfG says that, the first reason why MPs might find it difficult to stop a ‘No Deal’ Brexit, is because they triggered the UK’s Brexit countdown, when they approved Article 50.
“When Parliament overwhelmingly voted in favour of triggering Article 50, the legal default was set: if no deal is agreed, the UK leaves the EU without one,” says the IfG’s Maddy Thimont Jack, for example.
A second reason why the House of Commons may struggle to stop a ‘No Deal’ Brexit is because the government already passed most of the necessary Brexit legislation, under ex-Premier Theresa May.
This gives few opportunities for MPs to table motions or amendments, to oblige the government to agree a Brexit deal. Instead, the PM can simply wait down the clock until October 31st.
"The government could ignore MPs’ opposition to no deal. Simply voting against it in principle would not require the government to act, nor would it change the law.”
“There is very little legislation the government needs to pass before 31 October, and amending or voting it down would only limit the government’s powers in the event of no deal,” adds the IfG’s Ms. Thimont Jack.
Following the release of the IfG’s report, the possibility that there’s a ‘No Deal’ Brexit seems even greater. At present, the financial markets are pencilling in a roughly 40% chance that the UK will exit without a deal, up from 10% in February, according to The Telegraph newspaper.
As the UK’s Brexit deadline of Halloween nears, the world’s money managers could grow more nervous. This has dragged down the value of GBP.
Euro Versus Pound Could Be Affected, if MPs Oblige Mr. Johnson to Extend Brexit Deadline
That said, it’s important to note that, even though the IfG reports that Parliament could struggle to prevent the Prime Minister from achieving a ‘No Deal’ Brexit, MPs are continuing to plan this.
Looking ahead, this could affect the euro to pound interbank exchange rate, if for example, the House of Commons obliges the government to request a Brexit extension beyond October 31st.
According to The Times newspaper recently, MPs’ now plan to prevent a ‘No Deal’ Brexit, by forcing the Prime Minister to request a second extension of the Brexit deadline.
To be specific, the idea is to hold a ‘No Confidence’ vote in Mr. Johnson, then in the following 14 days, when it’s convention to try and form an alternative government, instead pass legislation to extend Article 50.
The Times reports that: "MPs are drawing up plans to compel Boris Johnson to break his “do or die” pledge and force him to request an 11th-hour Brexit extension from the European Union."
Apparently, the opposition Labour Party’s leader has reviewed this plan, as has senior Conservative rebel Dominic Grieve, plus 300 MPs who support holding a second Brexit referendum.
The plan’s document states that: “a general election must not be used as a device to get a no deal or any other form of Brexit over the line without the public having their say.”
This is to say, these MPs want Mr. Johnson to extend the Brexit deadline again, because even though the UK voted to exit the EU, we didn’t vote to leave without a deal, or without any compensatory arrangements.
At present, Parliament is in its Summer recess, and will reconvene on September 3rd. The Guardian newspaper reports that Downing Street thinks that the Brexit rebels will try to prevent a ‘No Deal’ Brexit in the following days, perhaps in September 9th.
So we’ll soon see if Parliament can oblige Mr. Johnson to extend Article 50, which may impact the value of the euro against the pound.
Euro Rates Today Might Be Influenced, as Italy’s Government Close to Collapse
It’s also worth mentioning that, looking forward, the euro to pound interbank exchange rate could be affected by factors other than Brexit too.
In particular, the value of the euro against British sterling might be influenced, because Italy’s populist, coalition government is on the verge of collapse. Italy is the Eurozone’s third largest economy, so this might impact the whole currency bloc.
Italy’s government looks close to collapse because, this week, Matteo Salvini’s right-wing League Party has withdrawn its support from its coalition with the left-wing Five Star Movement. Mr. Salvini argues that, after 14 months sharing power, the two parties’ ideological differences are too great to continue.
However, it’s more likely that, given that the League is now polling first among Italy’s political parties, Mr. Salvini wants to try and force an election. This could enable Mr. Salvini to establish a majority right-wing government, with smaller allies, according to The Washington Post.
Since the League Party withdrew its support from the coalition, the leaders of Italy’s Senate have met, to discuss calling a vote of ‘No Confidence’ in the government, led by independent Prime Minister Guiseppe Conte.
However, the Senate leaders failed to agree a course of action, so now Italy’s entire Senate has been called back from its Summer holidays, to discuss the ‘No Confidence’ vote.
In particular, Mr. Salvini wants to hold a ‘No Confidence’ vote and new elections as soon as possible, to capitalise on his growing popularity.
However, the League’s left-wing opposition, notably the Five Star Movement and Democratic Party, prefer to delay elections. They want to try to form an alternative government before going to the polls, to keep Mr. Salvini from the Premiership.
Italy’s political crisis might affect the value of the euro, because Italy is the Eurozone’s third-largest economy, and has one of the highest public debts in the developed world.
In recent months, Italy’s populist government has repeatedly wrestled with Brussels, over its plans to spend beyond its means. So if the League and Five Star Movement continue to dispute, this could spark a crisis.
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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 firstname.lastname@example.org.