The euro to the pound interbank exchange rate stands at 0.8977 today. This is just -0.1% below its highest in seven months, or since January 10th 2019.
By comparison, back on May 5th, the euro was as low as 0.8505 versus the pound sterling. So it's since risen by close to +4.75 cents, or by +5.55%.
This may be useful information for you, if you're a Brit selling property abroad in Spain, France or Italy, or if you're a Eurozone business owner importing UK products.
This is because, when you transfer money to the UK, you could now get a higher pound total in your British bank account. This is compared to if you'd exchanged currencies earlier in 2019.
In turn, this might make it more profitable for you to repatriate the proceeds of your property sale, or cut your business costs when you make international payments.
To stay up-to-date with the euro to pound interbank exchange rate, visit Pure FX's Rates & Tools page. There, select 'EUR' to 'GBP' to see the last week's exchange rates.
Also, to check what's affecting the value of the euro against the pound lately, visit our EUR to GBP Exchange Rate Updates page. Then click on the newest article.
A first reason why the euro to pound interbank exchange rate has neared this seven-month high is because Bank of England Governor Mark Carney has implied that UK interest rates may fall.
A second factor why the EUR has strengthened against the GBP is because the UK's construction sector shrank at the fastest pace since 2009 last month, said trusted statistics yesterday.
A third explanation why the euro has gained in value versus British sterling is because the candidates to become Prime Minister, Boris Johnson and Jeremy Hunt, have hardened their Brexit stance.
Let's look more closely at these factors why the euro to pound interbank exchange rate has risen. You might find this helpful, for when you decide to transfer money to the UK.
Euro Rises Versus Pound, as Carney Hints at Interest Rate Cut
As I mention, a first factor why the euro rates today have strengthened is because, yesterday, Bank of England (BoE) Governor Mark Carney suggested that the central bank may soon cut UK interest rates.
Speaking in Bournemouth on Tuesday, Mr. Carney said that the "stance of monetary policy is tighter than intended" and that "the rationales for action are broadening."
By this, Mr. Carney meant that, first, financial market expectations for UK interest rates are higher than the Bank of England prefers.
Second, the BoE Governor implied that the case to cut the UK's borrowing costs below their current 0.75% is growing. So this has contributed to weaken the value of the British pound sterling versus the Eurozone's common currency.
Mr. Carney suggested that the UK's central bank might have to cut interest rates, first because there's been a "sea change" in the outlook for the global economy.
In particular, Mr. Carney said that the United States' and China's trade war has caused a "shock" in business confidence and investment. This shock affects third-party countries, like the UK.
In addition, the UK central bank's Governor referred to the continuing uncertainties over Brexit. Mr. Carney said that the BoE will "re-assess Brexit and trade tension in August."
At this point, the UK will have its new Prime Minister, who'll have presented his Brexit stance and begun negotiating with the EU. So the BoE will be in a better position to decide its course of action then.
Following Mr. Carney's speech, the financial markets raised the probability that the BoE will cut UK interest rates by December this year up to 57%. This is from 41% before Mr. Carney's speech, reports The Financial Times.
This is because, up until recently, it's thought that the BoE was more optimistic than other major global central banks, such as America's Federal Reserve or the European Central Bank.
Mr. Carney's remarks have contributed to weaken the pound, because when the BoE cuts interest rates, this suggests that the UK's economy needs more monetary support to prosper.
Also, lower interest rates make investing in British financial assets less profitable for the world's investors. This cuts demand for these assets, which weakens the value of sterling.
Euro Rates Today Rise, as UK Construction Sector Shrinks
In addition, another factor why the euro to pound interbank exchange rate has neared this seven-month high is because the UK's construction sector shrank at the fastest pace in 10 years in June, said closely-watched data on Tuesday.
This follows reports on Monday that UK factory activity shrank more quickly than any time since 2013 last month, so bodes ill for the UK's economy.
According to economics watchdog IHS Markit yesterday, the UK's construction PMI (Purchasing Managers' Index) fell to 43.1 last month.
This is far below the 50.0 figure that separates growth from contraction, as well as May's figure of 48.6, and markets' forecasts for a rise to 49.3. It's the weakest UK construction result since April 2009, more than 10 years ago.
Activity fell in all three parts of the UK's construction sector in June, namely housebuilders, civil engineering firms, and commercial building contractors.
The fall in housebuilding was the sharpest since 2016, and IHS Markit said that firms have adopted a "wait-and-see" approach to Brexit, before deciding to commit to new projects. So the sector is increasingly on hold.
Samuel Tombs, the chief UK economist at Pantheon Macroeconomics, said about these figures that: "The threat of a no-deal Brexit reportedly has dampened demand for commercial projects."
Meanwhile, Duncan Brock, a director at the Chartered Institute of Procurement & Supply, added that: "Purchasing activity and new orders dropped like a stone in June,” reports The Guardian.
These downbeat UK construction data follow reports on Monday that UK factory activity fell at the fastest pace in six years in June.
This suggests to us that the UK economy is showing the effects of the Brexit uncertainty, following the passing of the original Brexit deadline of March 31st. This may slow the UK's economy in Q2 2019, so has weighed on the value of sterling.
EUR to GBP Gains in Value, as Candidates Harden Brexit Stance
Furthermore, another partial explanation why the euro to pound interbank exchange rate has risen is because the two candidates to become Prime Minister, ex-Mayor of London Boris Johnson and Foreign Secretary Jeremy Hunt, have hardened their Brexit stances this week.
This has raised the odds that the UK will exit the EU without a deal, by the extended deadline of Halloween.
This Monday, Mr. Johnson told a hustings event of Conservative Party members that, if there's a 'No Deal' Brexit, the impact will be "very, very small,” reports News Max.
The likely next Prime Minister added that: "There is as you know about 26 billion quids worth of headroom. The money is there." So this suggests that Mr. Johnson is relaxed about the possibility of a 'No Deal' Brexit.
Also, Mr. Johnson's campaign chairman, Iain Duncan Smith, told Sky News earlier this week that, if the EU won't renegotiate the existing draft Brexit deal, the UK would walk away.
Mr. Duncan Smith said that: "If all you are interested in doing is saying: 'All you can have is this deal', then the answer is: we will be prepared to leave on the 31st,” according to Euronews.
Lastly, Mr. Johnson's rival to become Conservative Party leader and Prime Minister, Jeremy Hunt, has toughened his Brexit stance too.
Mr. Hunt now says that, if it's clear that the UK and EU can't agree a Brexit deal by the end of September, a month before the official deadline, then the UK will pursue a 'No Deal', says the BBC.
The candidates' comments this week suggest that they're toughening their Brexit stance, to win the support of Conservative members.
These Conservative members will vote to decide who'll become Prime Minister, and are overwhelmingly in favour of a hard Brexit. So to become Prime Minister, Mr. Johnson's and Mr. Hunt's remarks make sense.
However, both British investors and UK businesses are worried that, if the UK exits the EU without a deal, we'd be cutting off export ties with our largest trading partner.
This might negatively affect the UK's future economic prosperity, including investment in new technology, hiring more employees or raising wages. So this has contributed to drag down the pound.
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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.