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Euro Rates Today Hit 21-Week High, on No Deal Brexit Risk

Market CommentaryEuro Rates Today Hit 21-Week High, on No Deal Brexit Risk
Euro Rates Today Hit 21-Week High, on No Deal Brexit Risk
Euro Rates Today.

The euro to pound interbank exchange rate stands at 0.8977 today at the time of writing. This is its highest in 21 weeks, or since January 11th.

By comparison, back on May 6th, the euro was as weak as 0.8505 versus the pound. So it's since risen by close to +4.75 cents, or by +5.55%.

This could be helpful information for you, if you're a Briton selling property abroad in Spain, France or Italy, or if you're a European business owner importing UK products.

This is because, when you transfer money to the UK, you could now get a higher pound sterling total in your British bank account, compared to earlier in 2019.

In turn, this would make it more profitable for you to repatriate the proceeds of your property sale, or cut your import costs for your business.

To stay up-to-date with the euro to pound rate, visit Pure FX's Rates & Tools page, and select 'EUR' to 'GBP'. You'll see today's euro to pound interbank exchange rate, and for the last week.

Also, to see what's affecting the value of the euro versus the pound, check Pure FX's EUR to GBP Exchange Rate Updates page. Click the latest article to read the most recent news.

A first reason why the euro rates today have reached this 21-week high is because the financial markets remain concerned that Boris Johnson might pursue a 'No Deal' Brexit.

A second factor why the euro to pound interbank exchange rate has strengthened is because the financial markets are buying the euro as a 'safe haven' from the USA and China's trade war.

Let's look more closely at these explanations why the euro has strengthened versus the pound. This could help you to decide when to transfer money to the UK in the foreseeable future.

Euro Rates Today Rises, as Boris May Pursue 'No Deal' Brexit

A first reason why the euro to pound interbank exchange rate has hit this 21-week high is because the financial markets are increasingly concerned that possible Prime Minister Boris Johnson will pursue a 'No Deal' Brexit.

Several times recently, Mr. Johnson has pledged to take the UK out of the EU by the end of the extended deadline of October 31st, "come what may, do or die”, reports The Telegraph newspaper.

Following Mr. Johnson's statements, the financial markets have increased the probability of a 'No Deal Brexit, in which the UK exits the EU without an agreement, to 35%. This is from 15% in May.

This reflects the fact that Mr. Johnson looks very likely to beat Foreign Secretary Jeremy Hunt to become the Conservative Party's next leader, and so Prime Minister, replacing Theresa May.

The financial markets are worried about the possibility of a 'No Deal' Brexit, because in this case the UK would revert to trading with the EU on World Trade Organisation (WTO) terms.

This would mean paying tariffs and dealing with bureaucracy to export products to Europe, when currently it's frictionless, because the UK remains part of the EU's Single Market.

In turn, British investors and UK businesses fear that, if we trade on WTO terms, this might slow the UK's economy. We currently do around half of our trade with the EU, so paying tariffs could have a notable impact on the UK's prosperity.

This could convince UK businesses to invest in new equipment more slowly, or hire fewer new employees in future. So this has weakened the pound.

However, it's worth noting that Mr. Johnson has also repeatedly said that he doesn't want a 'No Deal' Brexit.

Speaking to the BBC earlier this week, the ex-Mayor of London said that a 'No Deal' "is not where I want us to end up, it's not where I believe for a moment we will end up." So If Mr. Johnson achieves a Brexit deal with the EU, this could also influence sterling, looking ahead.

EUR to GBP Rate Gains, as Euro A 'Safe Haven' from Trade War

In addition, another factor why the euro to pound interbank exchange rate has reached this 21-week high is because the euro is acting as a 'safe haven' from the USA's and China's trade war.

What this means is, the financial markets are buying the euro, as a relatively stable, developed refuge, while the USA and China damage their economies by imposing tariffs on each other.

The euro is acting as a 'safe haven' from America's and China's trade dispute, even though the Eurozone's economy has slowed recently.

For example, Germany's manufacturing sector, arguably Europe's economic motor, is contracting quickly, as international demand declines. This is because the trade war has lowered demand among Germany's foreign clients, plus Brexit concerns, reports Express.co.uk.

As a result of the Eurozone's slowdown, the European Central Bank (ECB) recently strongly suggested that it will cut interest rates further in 2019, and relaunch its Quantitative Easing program of extraordinary stimulus.

This will mean reducing the Eurozone's interest rates to new all-time lows, below 0.0%, and pumping vast new sums into Europe's economy, to spur business growth.

For example, Andrew Kenningham, chief European economist at Capital Economics, said recently that "ECB President Mario Draghi has made it clear that the Governing Council intends to loosen monetary policy again before long.”

“The ECB is likely to resort to the most powerful tool in its toolkit: quantitative easing," added Mr. Kenningham. We'd normally expect this to weaken the euro.

However, given the financial markets' concerns over the trade wars, investors are nonetheless buying the euro, as a safe haven refuge from the USA's and China's comparative volatility.

Moreover, so long as the United States and China, the world's two-largest economies, continue to impose tariffs on each other, this could influence the value of the euro.

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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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