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Euro to The Pound Today at 1-Week High, on Election Uncertainty

Market CommentaryEuro to The Pound Today at 1-Week High, on Election Uncertainty
Euro to The Pound Today at 1-Week High, on Election Uncertainty
Euro Rates Today.

The euro to the pound interbank exchange rate stands at 0.8673 today. This is its highest in over one week, or since October 17th.

By comparison, back on October 21st, the Eurozone’s common currency was as weak as 0.8579 versus British sterling, so it’s since risen by close to one cent, or by +1.09%.

This could benefit you, because when you transfer money to the UK from Spain or France, you could now get a higher pound total, compared to if you’d exchanged currencies last week.

In turn, this may make it more profitable for you, if you’re selling property abroad in Andalusia or the Cote d’Azur, to transfer the proceeds of your property sale to your UK bank account.

To stay up-to-date with the euro to the pound interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, select ‘EUR’ (Euro) to ‘GBP’ (Great British Pound) to see this week’s rates.

Also, to find out what’s affecting the value of the common currency versus sterling recently, go to our EUR to GBP Exchange Rate Updates page. Here, simply click on the most recent article.

One reason why the euro to the pound today on the interbank market has hit this one-week high is because it looks like Labour may block a UK general election, causing a Brexit stalemate.

In addition, another factor why the EUR has reached this one-week high versus the GBP is because, if the UK is in Brexit stalemate, the EU may be less likely to grant the UK a lengthy extension.

However, looking to the next few months, the euro’s value versus sterling could be affected, because incoming European Central Bank (ECB) President Christine Lagarde may further ease policy.

Euro Rates Today Gain, as Labour Set to Block UK General Election

As I mention, one reason why the euro to the pound today on the interbank market has hit this one-week high is because it’s being reported that the UK’s official opposition Labour Party may block a UK general election from being held in the coming weeks.

As a result, it looks likelier that Westminster will enter a sort of Brexit stalemate, in which the government doesn’t present laws.

To explain, earlier this week MPs voted against Prime Minister (PM) Boris Johnson’s timetable to pass the Brexit legislation, called the Withdrawal Agreement Bill (WAB).

This is because Mr. Johnson wished MPs to read and scrutinise this 110-page document in just three working days, although it has historical and constitutional significance for the UK. So MPs voted against this.

As a result, it looks likely that the UK’s Brexit deadline will be extended beyond its current limit of October 31st, so that Westminster can decide its next steps.

In particular, yesterday PM Johnson announced that next Monday he’ll call for a UK general election, to be held on December 12th. This is so that the great British public can decide which party they want to finish Brexit.

However, according to the UK’s Fixed Terms Parliament Act, the UK can only hold an election every five years, unless 2/3rds of MPs vote otherwise.

Mr. Johnson leads a minority Conservative government, in which fewer than half of MPs belong to his party. So the PM needs Labour’s support to call an election. Yet according to reports overnight, Labour will refuse to support these calls.

In particular, Labour leader Jeremy Corbyn has suggested that he won’t vote to hold an election, until the possibility that there’s a ‘No Deal’ Brexit is firmly removed, reports The Guardian newspaper.

In turn, if Mr. Corbyn refuses to back an election, it looks increasingly likely that Westminster will enter a sort of stalemate.

For example, a Downing Street source told the Financial Times broadsheet yesterday that, in these circumstances, the government would refuse to present laws to the House of Commons. "Nothing will come before Parliament but the bare minimum."

To this end, yesterday the PM told the BBC that "We would campaign day after day for the people of this country to be released from subjection to a parliament that has outlived its usefulness.”

Mr. Johnson also wrote to Mr. Corbyn, asking him: "This parliament has refused to take decisions. It cannot refuse to let the voters replace it with a new parliament that can make decisions.”

In addition, according to ITV’s Political Editor Robert Peston, if there’s no Brexit progress and no election, then “Johnson will shelve the Withdrawal Agreement Bill. He will cancel the budget. There will be no government worth the name.”

“Parliament will become a zombie Parliament, unless and until the opposition find a way to wrest control from Johnson or hold an election,” adds Mr. Peston.

So this has weakened the pound, because it looks like the UK’s Brexit and political uncertainty could continue for the foreseeable future.

In particular, if the UK remains in Brexit “limbo”, businesses may continue to be wary about hiring staff or investing in new equipment. In turn, this could slow down the UK’s Gross Domestic Product (GDP) growth in the foreseeable future.

EUR to GBP Rate Rises, as EU May Be Wary About Granting Lengthy Extension

In addition, another factor why the euro rates today on the interbank market have risen is because, given the increasing stalemate at Westminster, the EU may be wary about granting the UK a lengthy Brexit extension, beyond the current October 31st deadline.

In turn, this could increase the political pressure on the UK to decide Brexit, or even increase the risk of an accidental ‘No Deal’.

This morning, the EU’s 27 ambassadors will decide how long to extend the UK’s Brexit deadline. This follows PM Johnson’s sending a letter to Brussels last Saturday, asking for a three month extension up to January 31st, in line with opposition MPs’ Benn Act.

Given that the EU wishes not be seen as the guilty party in case there’s a ‘No Deal’ Brexit, it’s likely to grant the extension, according to the BBC.

However, the EU has also previously said that it will only grant a Brexit extension, if circumstances merit. For example, these could include if the UK looks set to hold a general election, or even a second Brexit referendum.

Following events overnight, it looks unlikely that the UK will do either of these things, in which case it’s possible that the UK might simply use up extra extension time.

With this in mind, although a majority of the EU’s 27 states reportedly wish to grant the UK a three month extension, France’s President Emmanuel Macron prefers to give the UK just two weeks, to mid-November.

Mr. Macron’s intention is to focus minds in Parliament, to encourage them to approve the Brexit legislation, when they’ve already had three-and-a-half years to debate things.

For example, Marie Lebec, a member Mr. Macron’s En Marche party in France’s National Assembly, has told the BBC’s Today programme that the EU won’t approve an “extension for nothing”.

Ms. Lebec added that "What we need from the UK is really to know what they want.” So the EU wants assurances that, if Brussels grants another extension, the UK will use this time productively.

It’s hoped that the EU will announce its decision regarding the Brexit extension today. If not, then it’s thought that this signals there’s disagreement among the 27 members about how long the extension should be.

In this case, it’s possible that European Council President Donald Tusk may call an emergency summit next week, for Europe’s heads of state to decide the issue in person.

Moreover, there’s the possibility that, if the EU grants just a short Brexit extension, then Brussels might be seen as interfering in the UK’s domestic politics.

Far from encouraging MPs to approve Brexit, Parliamentarians may decide against this, in which case no Brexit deal would be agreed by a mid-November deadline. So there’s the possibility of an accidental ‘No Deal’ Brexit too, which has weighed down the pound.

Euro to The Pound Today Could Be Affected, as Lagarde to Take Over at ECB

Furthermore, looking to the next few weeks and months, the euro to the pound interbank exchange rate may be influenced, because former International Monetary Fund (IMF) head Christine Lagarde is set to become President of the European Central Bank (ECB) on November 1st.

It’s thought that Ms. Lagarde may further ease monetary policy, to prop up the Eurozone’s economy.

Yesterday, at current President Mario Draghi’s last meeting, the ECB held interest rates at their all-time low 0.0%, and continued its policy of printing €20 billion a month, called Quantitative Easing (QE), reports CNBC.

In Mr. Draghi’s press conference accompanying the decision, he told journalists that “an ample degree of monetary accommodation is still necessary” to support the Eurozone’s growth.

In particular, the ECB’s statement said that it expects QE “to run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates.”

So the central bank looks set to electronically inject tens or hundreds of billions of euros more into the Eurozone’s economy, to try and bring down the cost of taking out a loan.

However, it’s worth noting that, even with interest rates at 0.0%, the ECB has missed its inflation target of close-to-but-below 0.0% for six consecutive years now.

In addition, even having printed hundreds of billions of euros in the past, the Eurozone’s economic growth is close to 0.0%, with Germany in particular close to recession. So the ECB may feel obliged to do even more.

As a result, incoming President Christine Lagarde could try to further ease monetary policy, either this year or next. Ms. Lagarde is a famed relationship-builder, and could unite the Eurozone’s Northern and Southern blocs.

If Ms. Lagarde further cuts interest rates, or tries something new, this may support the Eurozone’s economy, yet traditionally, affects 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 Contact Us.

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