The euro to the pound interbank exchange rate has hit 0.8925 in the last day, just -0.09% below its recent three-week high, its strongest since Sunday 15th September, reached last Friday 4th October, of 0.8933.
By comparison, back on Friday 20th September, the Eurozone’s common currency was as weak as 0.8797 versus British sterling. So it’s since strengthened by +1.45%.
This could benefit you, because when you transfer money to the UK from Spain or France, you might now get a higher pound total, compared to if you’d bought sterling in the last three weeks.
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 the interbank rates.
Also, to check what’s influencing the value of the common currency versus sterling, visit our EUR to GBP Exchange Rate Updates page. Here, click on the most recent article to read the news.
One reason why the euro to the pound today has neared this three-week high is because UK Prime Minister (PM) Boris Johnson remains ambiguous about whether he’ll ask for a Brexit extension.
Another factor why the euro rates today have strengthened is because the EU’s response to Mr. Johnson’s revised Brexit plans last week has been lukewarm, cutting the odds of a Brexit deal.
Euro Rates Today Rises, as Boris Unclear About Whether He’ll Ask for Brexit Extension
As I mention, one reason why the euro to the pound today has neared this three-week high is because the UK government is being unclear about whether it will abide by the Benn Act.
This legally obliges PM Johnson to request a second extension to Article 50, the UK’s Brexit timetable. This ambiguity is worrying the financial markets that a Brexit agreement soon may be less likely.
To explain, last week the UK government submitted documents to a Scottish court, which confirmed that Mr. Johnson will abide by the Benn Act.
The Benn Act, passed by opposition MPs in the House of Commons in September, obliges the PM to ask for another extension to Brexit, if the UK and EU haven’t reached a deal by Saturday 19th October, two days after a crucial EU summit.
According to the Benn Act, if there’s no Brexit deal by October 19th, then Mr. Johnson must send a letter to the EU asking for an extension.
The Scottish court had convened, because opposition MPs wished to find out if “fines and imprisonment” could be brought against Mr. Johnson, if he didn’t obey the Benn Act, and if an alternative figure could send the letter in Mr. Johnson’s stead.
However, although the UK government’s documents suggest that Mr. Johnson will send the letter, sources at Number 10 Downing Street and Mr. Johnson’s allies continue to insist that the UK will exit the EU by the current deadline of October 31st, “come what may”, reports The Guardian newspaper.
So it’s ambiguous how the PM can abide by the Benn Act, while taking the UK out of the EU at the end of this month.
For example, Steve Baker, head of the pro-Brexiteer, influential European Research Group (ERG), has said that:
"A source confirms all this means is that Government will obey the law. It does not mean we will extend. It does not mean we will stay in the EU beyond Oct 31. We will leave." As a result, the financial markets wish to know what’s the government’s strategy to achieve this.
Meanwhile, a senior No 10 source has told the BBC’s Political Editor Laura Kuenssberg that:
"The government will comply with the Benn Act, which only imposes a very specific narrow duty concerning Parliament’s letter requesting a delay. The government is not prevented by Act from doing other things that cause no delay including other communications, private and public."
So the senior No. 10 source’s comments suggest that, while Mr. Johnson will obey the Benn Act, the UK government is simultaneously taking steps to ensure that there’s no Brexit extension.
For example, this could include convincing some EU members not to agree to a Brexit extension. This is because, to extend Brexit beyond October 31st, all 27 members of the EU must agree to this.
The UK government’s ambiguous strategy about the Benn Act have weakened sterling, because they raise the possibility that the UK might still exit the EU at the end of this month without a deal.
After all, if the PM can get around the Benn Act, and there UK and EU don’t reach an agreement in the next three weeks, then a ‘No Deal’ Brexit remains the UK’s default legal position.
Euro to The Pound Today Gains, as EU Response to UK Brexit Plan Lukewarm
In addition, another reason why the euro to the pound interbank exchange rate has neared this three-week high today is because the EU’s response to PM Johnson’s revised Brexit plan, submitted to Brussels last week, has been tepid.
This raises the likelihood that there’ll have to be further negotiations between the UK and the EU, to reach a Brexit deal before October 31st.
Mr. Johnson’s revised Brexit proposals include amendments to the so-called Northern Irish “backstop”. In its current guise, the “backstop” would oblige all of the UK to stay in the EU’s Customs Union after Brexit, if there’s no future trade deal.
This would ensure peace on the island of Ireland, yet simultaneously prevent the UK from pursuing independent trade deals, as a so-called “vassal state”.
As a result, the PM’s revised Brexit proposals seek to amend the backstop, to ensure that there’s no hard border on Ireland, while enabling the UK to reach trade deals with the USA, Australia or India.
Mr. Johnson’s plan is called the “two borders for four years” proposals, and means that Northern Ireland would retain elements of the UK’s and EU’s customs regulations up to 2025.
Crucially, Mr. Johnson’s proposals received a positive reception in Parliament. For starters, the PM’s Northern Ireland allies, the Democratic Unionist Party (DUP) said that they’re “content” with the plans.
Meanwhile, the Brexiteer ERG, led by Steve Baker, who voted down ex-PM Theresa May’s draft deal three times, said that they might consider voting for a Brexit deal for the first time.
This is encouraging, because if the EU sees that Mr. Johnson’s plan stands a good chance of passing in Parliament, they’re likelier to negotiate seriously with the PM.
However, in spite of this, the EU’s response to the PM’s Brexit proposals has been lukewarm, suggesting that there’ll either have to be further negotiations, or increase the odds that the UK will exit the EU with ‘No Deal’.
For example, Ireland’s Taoiseach (Prime Minister) Leo Varadkar, has said of Mr. Johnson’s proposals that “they do not form the basis for deeper negotiations”, reports ITV.
Mr. Varadkar’s opinion carries weight, because until Ireland is satisfied with the Brexit proposals, Dublin is unlikely to give them their rubber stamp. Brussels has repeatedly said that they’ll support Dublin in the negotiations.
Meanwhile, Guy Verhofstadt, the head of the European Parliament's Brexit oversight committee, has said that the proposals are “not positive in that we don’t think really there are the safeguards that Ireland needs.”
In addition, the EU’s Chief Brexit Negotiator Michel Barnier has remarked that “there’s improvement...we are not there yet,” to ensure that there’s no hard border on Ireland.
Following the EU’s tepid response, it’s not clear what the next steps are. On the one hand, if Mr. Johnson’s concedes further to the EU, he may risk losing the support of the DUP and ERG in Parliament.
On the other hand, if the PM sticks to his existing proposal, this raises the odds that there’ll be a ‘No Deal’ Brexit at the end of this month. So this has weakened the pound 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 Contact Us.