The euro to the pound interbank exchange rate stands at 0.8904 today, its highest in two weeks, or since Sunday 15th September.
By comparison, back on Friday 20th September, the common currency was as low as 0.8797 versus sterling, so it’s since risen by +1.21%.
This may benefit you, because when you transfer money to the UK, you might now get a higher pound total, compared to if you’d exchanged currencies in the last fortnight.
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) for this week’s interbank rates.
Also, to check what’s affecting the value of the Eurozone’s common currency against British sterling, visit our EUR to GBP Exchange Rate Updates page. Here, click on the most recent article.
One reason why the euro to the pound today has reached this two-week high is because the financial markets are awaiting fresh Brexit news, including Prime Minister (PM) Boris Johnson’s stance.
Another factor why the common currency has strengthened against sterling is because the Scottish National Party (SNP) has hinted that it may support a Jeremy Corbyn-led government.
A third explanation why the euro has risen versus the pound is because, last Friday, Bank of England policymaker Michael Saunders said that he may now support cutting UK interest rates.
Euro Rates Today Strengthen, as Markets Look to Next Brexit Events
As I mention, one reason why the euro to the pound interbank exchange rate has reached this two-week high today is because the financial markets are awaiting fresh Brexit news.
This has weakened sterling, because when the world’s money managers aren’t sure what may happen regarding Brexit, they tend to sell the pound, until there’s clarity over the UK’s future with the EU.
Last week, the UK’s Brexit progress slowed considerably. This is because, following the Supreme Court’s ruling that PM Johnson’s decision to prorogue Parliament is illegal, MPs reconvened in the House of Commons, and demanded explanations of the PM.
According to John Bercow, the Speaker of the House, the ambience was “toxic” and “the worst I’ve known in 22 years in the House”, reports The Guardian newspaper.
In particular, the relationship between opposition MPs and PM Johnson seems unusually antagonistic, because Mr. Johnson is using aggressive, adversarial language.
For example, Mr. Johnson is describing opposition MPs’ law obliging the PM to request another Brexit extension as “the surrender bill”. It’s feared that this is encouraging aggressive behaviour against MPs by some members of the public, including death threats.
Equally however, opposition MPs aren’t acting in a conciliatory manner towards Mr. Johnson either. For instance, last week MPs refused to allow Parliament to go to recess, so that the Conservative Party can hold its annual conference, as is convention.
In spite of MPs’ decision, the Tories will hold their conference in Manchester this week, while junior ministers hold the fort at Westminster.
Mr. Johnson will give his speech to the Conservative Party conference this Wednesday, in which it’s hoped that he’ll reveal further details of his Brexit strategy.
In particular, it’s thought that Mr. Johnson’s minority Tory government may continue to refuse to comply with the Benn Act, to extend the Brexit limit beyond October 31st, and could use a legal loophole to avoid doing so.
For example, according to yesterday’s The Observer on Sunday, Mr. Johnson could invoke the Civil Contingencies Act 2004. This gives the government special powers in a national emergency, to override Parliament.
Similarly, last week former PM John Major warned that Downing Street could use an “Order of Council” to suspend the Benn Act, which doesn’t require the Queen’s or MPs’ permission.
If Mr. Johnson takes steps to get around the Benn Act, so that the UK would exit the EU by October 31st with or without a deal, this would almost certainly be challenged in the courts.
It’s also likely to further antagonise Mr. Johnson’s relationship with opposition MPs in Parliament. In the meantime, financial markets are awaiting greater Brexit clarity, and this has weakened the pound.
EUR to GBP Strengthens, as SNP May Support Corbyn Government
In addition, another factor why the euro to pound interbank exchange rate has reached this two-week high is because the Scottish National Party (SNP) has said that it may support a government led by Labour Party leader Jeremy Corbyn.
This has weakened sterling, because Mr. Corbyn is an old-fashioned socialist, and it’s feared that his policies would hurt the UK’s economy.
To be specific, last Friday 27th September, a source near to the SNP’s leadership told ITV's Political Editor Robert Peston that, for the SNP’s Westminster leader Ian Blackford and Scotland’s First Minister Nicola Sturgeon, the only way to guarantee avoiding a ‘No Deal’ Brexit is to remove Boris Johnson from office.
As the Leader of the Opposition, Mr. Corbyn is the logical replacement.
The Scottish National Party source told Mr. Peston that: "It is increasingly clear that we will have to install a new prime minister via a vote of no confidence, so that we can request a delay to Brexit and hold an election.”
“The convention is absolutely clear that it is the leader of the opposition - in this case Jeremy Corbyn - who should become prime minister in those circumstances,” added the source.
With this in mind, the SNP could try and convince Mr. Corbyn to hold a vote of ‘No Confidence’ in Mr. Johnson this week. As the Leader of the Opposition, it’s Mr. Corbyn’s prerogative to do so.
If and when there’s an alternative government in place, Mr. Corbyn could request a further extension to Article 50, negotiate a ‘soft’ Brexit with the EU, or even set up a second Brexit referendum.
However, while the UK would arguably pursue a ‘soft’ Brexit if Mr. Corbyn entered Number 10 Downing Street, the SNP’s remarks have nonetheless weakened the pound.
This is because, once Mr. Corbyn is PM, it’s thought that he’ll raise taxes, renationalise several industries, add red tape to businesses, and make the UK less internationally competitive, thus slowing the economy.
On the other hand, it’s worth adding that, just because the SNP has suggested that it may support a Labour-led government, there’s no guarantee that Mr. Corbyn will win power.
This is because, to win a vote of ‘No Confidence’ against PM Johnson, Mr. Corbyn needs the support of all opposition parties. The Liberal Democrats’ leader, Jo Swinson, has ruled out supporting Mr. Corbyn.
Alternatively, it’s even possible that Mr. Johnson’s government could change tac, and adopt a more conciliatory pose toward both opposition MPs and the EU.
This is because, according to The Sun’s Political Editor Tom Newton Dunn, a growing number of Mr. Johnson’s Cabinet are growing frustrated with Mr. Johnson’s “aggressive” approach, spearheaded by special advisor Dominic Cummings.
For example, a Cabinet source has told Mr. Dunn that: "We’re never going to beat the numbers in the Commons, and they are against us. The PM has to lean in now and take what he can get. Being aggressive doesn’t work, the Cummings plan has clearly failed.”
As a result, the outlook for Brexit remains up-in-the-air, and this has contributed to weaken the value of the pound.
Euro Versus Sterling Rises, as BoE Saunders Hints at Interest Rate Cut
Furthermore, another explanation why the euro to the pound today has reached this two-week high is because Bank of England (BoE) policymaker Michael Saunders revealed last Friday that he may now support cutting UK interest rates, below their current 0.75%.
This has dragged down sterling, as lower interest rates make investing in GBP-denominated financial assets less attractive.
In his speech last Friday at the Barnsley & Rotherham Chamber of Commerce, Mr. Saunders said that:
"The economy could follow very different paths depending on Brexit developments. |But in my view, even assuming that the UK avoids a no-deal Brexit, persistently high Brexit uncertainties seem likely to continue to depress UK growth below potential for some time, especially if global growth remains disappointing."
Mr. Saunders added that: "In such a scenario – not a no-deal Brexit, but persistently high uncertainty – it probably will be appropriate to maintain an expansionary monetary policy stance and perhaps to loosen further."
This is to say that, what with the ongoing Brexit uncertainty, to support the UK economy, the BoE could cut interest rates below their current 0.75%, closer to 0.0%.
The BoE policymakers’ comments are significant, because until recently, it’s thought that Mr. Saunders was in favour of hiking UK interest rates.
However, what with the continuing Brexit uncertainty, and its weighing on British business confidence, Mr. Saunders now prefers to ease monetary policy. This supports UK economic growth, by cutting the costs of taking out a loan.
Meanwhile, looking to this week, IHS Markit’s PMIs (Purchasing Managers Indices) for the UK for September will be released. These will tell us if UK economic momentum has slowed further, following Q2’s -0.2% fall in GDP (Gross Domestic Product), and could influence sterling.
Meanwhile, the Eurozone’s latest inflation and retail sales figures will be announced, and could similarly affect the value of the euro.
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