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Euro to The Pound Today Hits 10-Year High, on ‘No Deal’ Risk

Market CommentaryEuro to The Pound Today Hits 10-Year High, on ‘No Deal’ Risk
Euro to The Pound Today Hits 10-Year High, on ‘No Deal’ Risk
Euro to The Pound Today.

The euro to pound interbank exchange rate has hit 0.9395 in the last day. This is the euro’s strongest versus sterling in over 10 years, or since January 19th 2009, according to Macro Trends.

By comparison, back on May 6th this year, the Eurozone’s common currency was as weak as 0.8505 versus British sterling. So the euro has since risen by close to nine cents, or by +10.64%.

The euro has now strengthened versus the pound for 14 consecutive weeks. This is the euro’s longest winning streak against the pound since the common currency was set up, in 1999.

The euro to pound interbank exchange rate’s all-time high is 0.9714, reached in December 2008. So at today’s interbank exchange rate of 0.9395, the EUR to GBP is just -3.39% below this point.

The euro’s strength versus sterling may benefit you, if you’re a Brit selling property abroad in Spain or France, or a Eurozone business owner importing British products for your customers.

This is because, when you transfer money to your UK bank account, you might now get a higher pound sterling total. This is compared to if you’d exchanged currencies in the last 10 years.

In turn, this would make it more profitable for you to repatriate the funds of your Spanish or French property sale to the UK, or cut your international payments costs for your company.

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 affecting the value of the euro against British sterling recently, visit our EUR to GBP Exchange Rate Updates page. Here, click on the latest article to read the news.

A partial explanation reason why the euro to pound interbank exchange rate has reached this 10-year high is because a new report says that it will be difficult for MPs to stop a ‘No Deal’ Brexit.

That said, looking forward, the value of the euro against the pound might be affected by economic data this week, including UK wage growth statistics and Eurozone industrial production data.

Please find below a further examination of these factors why the euro has reached this 10-year high versus the pound. You might find this helpful, ahead of your money transfer to the UK.

Euro Rates Today Rise, as MPs May Find It Tougher to Block ‘No Deal’ Brexit

As I mention, a partial explanation why the euro to pound interbank exchange rate has reached this 10-year high is because MPs in the House of Commons may more difficult to block a ‘No Deal’ Brexit, says a respected new report.

This has weakened the value of sterling, because the financial markets are concerned that this lifts the odds that the UK will exit the EU without a deal.

MPs in Parliament could find it tougher to block a ‘No Deal’ Brexit in the eleven weeks or so remaining until the UK’s Brexit deadline of October 31st, reports The Guardian newspaper.

This is because Prime Minister Boris Johnson’s government doesn’t plan to introduce any new Brexit legislation before that date, according to a new report by the respected Institute for Government (IfG), published this weekend.

This could make it more difficult for MPs opposed to a ‘No Deal’ Brexit to stop Mr. Johnson taking the UK out of the EU without a deal, because when the government doesn’t introduce Brexit legislation, MPs can’t table motions or amendments changing that legislation.

According to the IfG, this means that MPs who want to prevent a ‘No Deal’ Brexit need a “change of approach”.

When Theresa May was Prime Minister, it was relatively easy for MPs to table amendments changing Mrs. May’s Brexit plans, because Mrs. May’s government introduced lots of Brexit legislation, to prepare for the UK’s exit.

However, now that Parliament’s Brexit preparatory work is mostly complete, Mr. Johnson can just wait until the Brexit deadline of Halloween, for there to be a ‘No Deal’ exit.

The Institute for Government’s report says that: “MPs looking to force the government into a change of approach face a huge challenge when Parliament returns” from its Summer recess, on September 3rd.

The IfG adds that: “Even if [MPs] can assemble a majority for something, they may find few opportunities to make their move – and time is running out.” This has contributed to weaken the pound.

EUR to GBP Strengthens, as MPs Come Up with Plans to Stop ‘No Deal’ Brexit

That said though, MPs are coming up with a growing number of plans to stop the Prime Minister forcing through a ‘No Deal’ Brexit.

The UK’s Parliamentarians are trying to stop a ‘No Deal’, because even though the UK clearly voted to exit the EU on June 23rd 2016, the referendum didn’t say on what terms we leave. Most MPs prefer an exit with a deal, which might be smoother for the UK economy.

For example, the leader of the opposition Labour Party, Jeremy Corbyn, has said that he’d call a vote of ‘No Confidence’ in Mr. Johnson’s government, soon after Parliament returns from recess.

Mr. Corbyn’s objective would be to demonstrate that the House of Commons doesn’t have confidence in Mr. Johnson, in which case it’s convention for the Prime Minister to resign.

To this end, the Labour Party has told its MPs to cancel their travel plans for early September. This is to ensure that all Labour MPs are available to vote in Parliament around these dates.

This suggests that Mr. Corbyn is gearing up to call a vote of ‘No Confidence’ in Mr. Johnson’s government, when the House of Commons returns to session next month.

In addition, MPs are planning to alter Parliament’s conventions, to give themselves more time to prevent a ‘No Deal’ Brexit. For example, it’s normal for the House of Commons to break up for three weeks in mid-September, for the UK’s political parties’ conference season.

However, some MPs wish to force Parliament to stay in session over this period, to prevent a ‘No Deal’ Brexit.

For instance, Labour MP Peter Kyle told The Independent newspaper over the weekend that: “if we have a populist in government who is flouting convention and acting in a way that bypasses the sovereignty of Parliament, Parliament will respond accordingly.”

So many MPs clearly desire to prevent Mr. Johnson achieving a ‘No Deal’ Brexit by Halloween, against Parliament’s wishes.

Lastly, a group of MPs is also planning to compel Mr. Johnson’s government to request another extension to Article 50, the UK’s Brexit deadline.

This would ensure that, if for example there’s a general election leading up to the Halloween deadline, the UK has more time to figure out what Brexit it wants. Moreover, according to the IfG, this plan has the likeliest chance of success.

However, even though the financial markets and many British businesses prefer the UK to exit the EU with a deal, sterling continues to weaken, in spite of MPs’ efforts to block a ‘No Deal’.

This is because, first, the options to prevent a ‘No Deal’ are running out, as is the time to do so, reports the Institute for Government. In addition, the MPs’ efforts add to the UK’s political uncertainty.

Euro Versus Pound Might Be Affected by UK and Eurozone Economic Data This Week

Meanwhile, looking forward, the euro to pound interbank exchange rate could be affected both by Brexit, plus the UK’s and Eurozone’s economic releases this week.

In particular, the financial markets could watch the UK’s economic performance carefully, following news last week that UK GDP (Gross Domestic Product) contracted by -0.2% in Q2, the first decline since 2012.

This week, we’ll learn the UK’s unemployment and wage growth figures for June 2019, this Tuesday 13th August 2019 at 09.30 BST. It’s forecast that British joblessness held at 3.8% in the three months to June, which would be the joint-lowest since the mid-1970s, according to FX Street.

If these predictions prove correct, it would suggest that the UK’s labour markets remains in fine fickle, even with Brexit.

The world’s money managers will also pay close attention to the UK’s wage growth figures tomorrow. It’s forecast that UK Average Earnings Including Bonuses rose by +3.8% in the three months to June year-on-year, +0.2% above May’s figures.

If so, this would suggest that employers continue to pay their workers more, as the unemployment rate decreases, thus lifting Britons’ living standards and prosperity.

The financial markets might feel relieved, if UK unemployment remains low and British wage growth stays high tomorrow. This is because, first, this would suggest that the UK economy retains underlying strength, even though GDP fell by -0.2% in Q2.

In addition, this could encourage the Bank of England to keep interest rates at 0.75%, rather than cut borrowing costs, like other major central banks such as the US Federal Reserve.

This week, we’ll also learn UK inflation figures for July 2019, due on Wednesday 14th August at 09.30 BST. UK price pressures are forecast to fall by -0.1% from June, to 1.9%.

However, this would still be very close to the Bank of England’s 2.0% inflation target, in turn providing another reason for the UK’s central bank to keep borrowing costs stable for the time being.

Lastly, UK retail sales statistics for July will be released this Thursday 15th August, at 09.30 BST too. These are an important indicator of UK economic strength, as retail sales contribute greatly to Britain’s GDP growth.

Economists have pencilled in that UK retail sales fell by -0.3% in July compared to a month ago. If this, would be a marked decline from June’s +1.0% increase, and signal slower UK GDP expansion.

Furthermore, we’ll also learn the Eurozone’s industrial production performance for June 2019, due on Wednesday 14th August. This is forecast to show a -1.4% decline month-on-month, as the currency bloc’s factories reduce their output, due to the USA’s and China’s trade war.

We’ll also learn the Eurozone’s investor confidence, from ZEW, which it’s thought will show a fall to -21.7 in August. These economic releases this week could affect the value of the euro against 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 peter.lavelle@purefx.co.uk.

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