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Euro Rates Today: UK Election Likelier as Tories Lose MP

Market CommentaryEuro Rates Today: UK Election Likelier as Tories Lose MP
Euro Rates Today: UK Election Likelier as Tories Lose MP
Euro to The Pound Today.

The euro to pound interbank exchange rate stands at 0.9158 at the time of writing today. This is just -0.27% below its highest in 22 months or since September 5th 2017, reached earlier this week, of 0.9183.

By comparison, back on May 6th, the Eurozone’s common currency was as weak as 0.8505 versus British sterling. So the euro has since strengthened by over +6.5 cents, or by +7.67%.

This could benefit you, if you’re a Briton selling property abroad in Spain or France to repatriate the funds to the UK, or a Eurozone business owner importing British products for your company.

This is because, when you transfer money to your UK bank account, you might now get a higher pound sterling total, compared to if you’d exchange currencies in the past couple of years.

In turn, this would make it more profitable for you to repatriate the funds of your Spanish or France property sale to the UK, or make your international payments cheaper to import British goods.

To stay updated with the euro to pound interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, select ‘EUR’ to ‘GBP’ to see the interbank exchange rate for today and the last week.

Also, to check what’s influencing the value of the euro against the pound, visit our EUR to GBP Exchange Rate Updates page. Here, click on the most recent article to read the latest news.

A first factor why the euro rates today have neared this 22-month high is because it looks likelier that there’ll be a UK general election this year, as the Conservatives have lost a by-election.

A second reason why the euro to pound interbank exchange rate has strengthened is because the Bank of England has acknowledged that a ‘No Deal’ Brexit looks likelier than in May.

Let’s look more closely at these reasons why the euro has neared this 22-month high against the pound. You might find this helpful, for when you transfer money to the UK later this year.

Euro to The Pound Today Nears 22-Month High, as Tories Lose By-Election

As I mention, a first factor why the euro to pound interbank exchange rate has neared this 22-month high today is because it looks likelier that a UK general election will be held this year.

In turn, this would increase the UK’s political uncertainty, at a time when the financial markets are already biting their nails over the outcome of Brexit, and the rising possibility of a ‘No Deal’.

It looks likelier that there’ll be a UK general election later in 2019, because yesterday, the Conservative Party lost a by-election. This reduces new Prime Minister Boris Johnson’s majority in the House of Commons to just one MP.

This will make it difficult for Mr. Johnson to pass laws in Parliament, particularly regarding controversial topics where MPs have lots of opinions, such as Brexit.

On Thursday 1st August 2019, the Conservative Party lost the Brecon and Radnorshire by-election, to the Liberal Democrats. The by-election was called, because the Tory MP Chris Davies was convicted of falsifying expenses.

In the vote, the Lib Dem candidate Jane Dodds won 13,826 votes, a majority of 1,425. The Tories’ Mr. Davies, who ran again, came second with 12,401 votes, reports the BBC.

Following the Lib Dems’ victory yesterday, the party’s new leader Jo Swinson said that: "Boris Johnson's shrinking majority makes it clear that he has no mandate to crash us out of the EU.”

“I will do whatever it takes to stop Brexit and offer an alternative, positive vision. We now have one more MP who will vote against Brexit in parliament." So the opposition to a ‘No Deal’ Brexit is rising.

EUR to GBP Exchange Rate Rises, as Boris’s Majority Falls to One MP

Now that the Tories have a majority of only one MP in the House of Commons, it would take just a few Conservative rebels for the new Prime Minister to lose votes, or for a vote of ‘No Confidence’ to be called.

For example, already ex-Chancellor Philip Hammond and former Attorney General Dominic Grieves have said they’d vote against a ‘No Deal’ Brexit government.

If the House of Commons is determined to stop a ‘No Deal’ Brexit, then calling a vote of ‘No Confidence’ in Mr. Johnson’s government might be the only way.

This is because a vote of ‘No Confidence’ would bring down Mr. Johnson’s government, preventing him for taking the UK out of the EU without a deal. So the new Prime Minister has reason to feel that his hold in power is thin.

As a result of the Conservatives’ defeat yesterday, PM Johnson might call a UK general election, to try and get a stable majority of MPs, to govern in Parliament.

However, though Mr. Johnson might call an election, there’s no guarantee that he’d get his majority. After all, the UK’s political landscape is fragmented, with support split among the Tories, Labour, Lib Dems and Brexit Party.

For example, according to the latest YouGov polls, the British public’s support for the four main political parties is evenly divided, between 20%-25% each.

So there’s no guarantee that Mr. Johnson would obtain a majority for the Conservatives, in an election. Alternatively, he might have to enter a coalition with Nigel Farage’s Brexit Party, or Labour and the Lib Dems could win more seats.

In the case that the opposition Labour Party and the resurgent Lib Dems win a majority in Parliament, then Mr. Johnson would become the shortest-serving Prime Minister in UK history.

This would further contribute to the UK’s political uncertainty, at a time when the Brexit deadline of October 31st is ticking down. This has weakened the value of the pound sterling.

Euro Rates Today Strengthen, as BoE Cuts UK Economic Growth Forecasts

In addition, another reason why the euro to pound interbank exchange rate has neared this 22-month high today is because, yesterday, the Bank of England (BoE) announced its latest UK interest rates decision.

The UK’s central bank kept borrowing costs on hold, as widely forecast. However, the BoE also cut its UK economic growth forecasts for the next two years, reports Forbes.

On Thursday 1st August 2019, the BoE held UK interest rates at 0.75%, as financial markets had predicted. All nine members of the central bank’s Monetary Policy Committee (MPC) voted to keep UK interest rates steady.

This tells us that the BoE’s policymakers are united in thinking that UK interest rates should stay steady for now, with no policymakers favouring a hike or a cut.

Although the BoE kept interest rates steady on Thursday, its decision could be considered a vote of confidence in the UK economy, given that other major central banks are currently cutting interest rates.

For example, earlier this week the US Federal Reserve cut interest rates by -0.25%, to 2.00-2.25%, while the European Central Bank is being tipped to cut in September.

In this context, the fact that the BoE didn’t suggest that it plans to cut interest rates suggests that the central bank has confidence in the UK economy.

This reflects the fact that, for example, UK unemployment currently stands at its lowest since the mid-1970s, while UK wages are growing at the fastest rate since the 2008 financial crash. This is in spite of the ongoing Brexit uncertainty.

However, even though the BoE didn’t suggest that it will UK interest rates yesterday, the central bank reduced its forecasts for UK economic growth.

To be specific, the Old Lady of Threadneedle Street, as the BoE is affectionately called, cut its 2019 GDP (Gross Domestic Product) outlook by -0.2%, to 1.3% in 2019, compared to its May forecasts.

In addition, the BoE reduced its 2020 GDP growth forecast by -0.3%, to 1.3%. According to the central bank, this is because of the growing possibility of a ‘No Deal’ Brexit, in which we’d break off our political and economic ties with the EU, without future arrangements.

This is also because US President Donald Trump’s trade disputes have weakened the global economic outlook.

This has weakened the pound, because the Bank of England’s forecasts suggest that the UK economy is decelerating, even though the central bank isn’t yet contemplating cutting interest rates.

In general, slower economic growth means that there are fewer investment opportunities in a country. This cuts demand for the country’s currency, thus weighing down the value of sterling.

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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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