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Euro to The Pound Today: EU Set to Grant Brexit Extension

Market CommentaryEuro to The Pound Today: EU Set to Grant Brexit Extension
Euro to The Pound Today: EU Set to Grant Brexit Extension
Euro Rates Today.

The euro to the pound interbank exchange rate stands at 0.8649 today. This is just 0.43% below its 11-day high, reached last October 17th, at 0.8687.

By comparison, back on October 21st, the Eurozone’s common currency was as weak as 0.8579 versus British sterling. So it’s strengthened by over half a cent, or by 0.81%.

This could benefit you, when you transfer money to the UK from Spain or France, because when you exchange currencies, you might get a higher pound total than in the last 11 days.

In turn, if you’re selling property abroad on the Costa del Sol or the in the Languedoc to repatriate the funds to the UK, this may make exchanging euros to pounds more profitable for you.

To stay up-to-date with the euro to the pound interbank exchange rate, visit Pure FX’s Rates & Tools page.

Or 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, click on the latest article for the news.

One factor that could affect the value of the euro versus the GBP this week is that, perhaps today, the EU (European Union) looks set to grant the UK another three month extension to Brexit.

Another aspect that might influence that euro to the pound today on the interbank market is the possibility that, if and when the EU grants its extension, the UK may call a general election.

In addition, looking to this week, the euro to pound interbank exchange rate might be impacted by UK and EU economic data, including the Eurozone’s economic growth data for this Summer.

Euro Rates Today Could Be Affected, as EU to Grant UK Brexit Extension

As I mention, one reason why the euro to the pound interbank exchange rate has neared this 11-day high is because the EU looks set to grant the UK a three month Brexit extension today, up to October 31st.

This has relieved some financial market investors, who’d feared that there might be just a two week Brexit extension, while it also further cuts the possibility of an accidental ‘No Deal’.

To explain, last Saturday 19th, UK Prime Minister (PM) Boris Johnson sent a letter to the EU, asking for the Brexit deadline to be extended beyond this Thursday 31st.

Mr. Johnson did this, to comply with opposition MPs’ Benn Act, which obliged the PM to request more time to finalise Brexit, if no agreement had passed Parliament by Saturday 19th. Mr. Johnson begrudgingly complied.

Since then, the EU’s 27 member states have been watching developments in Westminster, to decide whether to grant the UK’s request for a second Brexit extension, and for how long.

The vast majority of the EU’s countries, as well as European Council (EC) President Donald Tusk, favour extending Brexit by three months. Yet France prefers to extend Brexit by just two weeks, to mid-November.

French President Emmanuel Macron’s argument is that the UK’s MPs have already had three-and-a-half years to debate the UK’s exit from the EU, so they should know what sort of Brexit they want.

Mr. Macron wants to grant just a short extension, to focus minds in the House of Commons, and pressure MPs to approve the deal, so that talks can move to the future trade deal.

However, European Council President Mr. Tusk is concerned that, if the EU27 grants just a two week extension, it might look like Brussels is interfering in the UK’s domestic politics.

Far from convincing MPs in Parliament to pass the Brexit deal, this could convince them to reject it. With just a short extension stretching to mid-November, this raises the chances that there’d be an “accidental” ‘No Deal’.

As a result, over the weekend it looks like Mr. Tusk has convinced Mr. Macron to extend the Brexit deadline by three months. According to Brussels law, the EU27’s decision must be unanimous, so Mr. Macron’s support to further Brexit up to January 31st is vital.

So according to French government sources, it’s “very probable” that the UK’s three month Brexit extension will be announced later today.

The Guardian newspaper reports that the Brexit extension has already been legally drafted. This includes the key language:

“The period provided for in article 50 (3) TEU as extended by the European council decision (EU) 2019/584 is hereby further extended until 31 January 2020." Also, if the House of Commons votes for Brexit before January 31st, the UK can leave before then.

This may affect the euro to the pound interbank exchange rate, because the EU’s Brexit extension provides further reassurance that the UK won’t exit the EU with ‘No Deal’ in the immediate future.

It’s thought that if the UK leaves Europe on cordial terms, this will make it easier to negotiate a future trade agreement and help protect the UK’s business connections on the continent.

Euro to The Pound May Be Influenced Today, as UK to Decide Whether to Call Election

Furthermore, looking to this week and beyond, another factor that may affect the euro to pound interbank exchange rate is the fact that, when and if the EU grants the UK’s Brexit extension, the UK must decide what to do with the extra time.

In particular it’s thought that PM Johnson wishes to call a general election as soon as possible, yet he faces resistance from the Labour Party.

Late last week, Mr. Johnson, the leader of a minority Conservative government where fewer than half of MPs belong to his party, offered a pact to the opposition.

The PM will allow MPs until November 6th to scrutinise Mr. Johnson’s Brexit deal, called the WAB (Withdrawal Agreement Bill), and in exchange, opposition MPs would vote to hold a general election on December 12th.

Mr. Johnson must ask for the opposition’s support to call a general election, because under the UK’s Fixed Terms Parliament Act, the UK can only hold a general election every five years, unless 2/3rds of MPs vote to do so.

So the PM depends on the support of Labour, led by Jeremy Corbyn, to call an election later this year. Moreover, Mr. Johnson has several motives to hold an election.

To begin with, the PM wants the opportunity to regain his lost Parliamentary majority. This will enable Mr. Johnson to “get Brexit done”, and pursue his UK domestic agenda, without opposition interference.

What’s more, according to the latest Opinium poll, the Conservatives have a 16-point lead over Labour. So Mr. Johnson is chomping at the bit to capitalise on his greater popularity.

Yet as I mention, Labour’s Mr. Corbyn has so far been reluctant to support calling a general election. Mr. Corbyn says that this is because he won’t risk Mr. Johnson slipping a ‘No Deal’ Brexit through the back door.

The Labour leader remarked on Saturday that he’ll “be very happy to fight an election once all vestiges of a no-deal exit from the EU have been taken off the table”.

In addition, an observer might add that, given that Labour is 16 points behind in the polls, Mr. Corbyn may feel less gung-ho about going to the ballot boxes than Mr. Johnson.

In fact, it’s thought that, even if Mr. Corbyn decides to support a general election, then several of his Labour MPs may nonetheless vote against this. This would be to keep their seat in Parliament.

With all this in mind, it’s by no means guaranteed that, if and when the EU grants the Brexit extension, the UK will use the time productively.

Over the weekend, some smaller opposition parties; the Liberal Democrats (Lib Dems) and Scottish National Party (SNP) proposed a way out of this stalemate, in which MPs could vote to an election with a simple majority, not with 2/3rds support.

According to a French official, part of the reason why the EU looks set to grant the Brexit extension, is because of the "significantly more likely prospect of fresh elections, now backed by several parties including the Liberal Democrats and the SNP”.

Yet for the Lib Dems and SNP’s idea to gain traction, it must first win Mr. Johnson’s support, and itself be passed by a majority in Parliament.

As a result, the UK’s Brexit outlook remains up-in-the-air. On the bright side, the UK looks unlikely to exit the EU with ‘No Deal’ in the immediate future.

However, it’s unclear whether the UK will use the extra time productively, or if MPs will remain unable to decide whether to hold a general election. We’ll see in the coming days, which could affect the euro to pound interbank exchange rate.

EUR to GBP Interbank Rate Might Be Impacted, by UK and EU Economic Data

Moreover, the euro to the pound interbank exchange rate could be influenced this week, by key UK and EU economic releases too.

These include the Eurozone’s GDP (Gross Domestic Product) figures for the Summer, as well as the euro bloc’s latest inflation and unemployment figures, due this Thursday. Meanwhile, UK manufacturing performance data is scheduled for this Friday, according to FX Street.

It’s forecast that the common currency bloc’s GDP expanded by just +0.1% in Q3, between July and September, and +1.1% year-on-year. This would be below Q2’s economic growth of +0.2%, and +1.2% compared to a year ago.

If these predictions are accurate, it would point to growing economic stagnation in Europe, in part because of the USA’s and China’s ongoing trade dispute.

Elsewhere, it’s thought that Eurozone inflation rose by just 1.0% in October, while core inflation, which accounts for the euro area’s domestic price pressures, is forecast at just +0.8%.

These would remain far below the European Central Bank (ECB) official target of close-to-but-below 2.0%, and so signal that the Eurozone economy remains too weak for businesses to lift their prices.

According to Wells Fargo, “The Eurozone economy has struggled for the past several quarters, something we expect continued in Q3, where we forecast growth of just 0.1% quarter-over-quarter.”

“With economic growth slow and inflation modest, expect further ECB monetary easing in the months ahead." So these statistics may affect the value of the euro versus the pound later this week.

Meanwhile, IHS Markit’s UK manufacturing PMI (Purchasing Managers’ Index) for this month is due this Friday 1st November. It’s predicted to fall by -0.2 points from September, to 48.1.

This would be further below the 50.0 figure that separates economic growth from contraction, and signal that UK factory activity continues to shrink. This would reflect an ongoing worldwide trend.

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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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