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Euro to The Pound Today Rises, as MPs Reject Brexit Timetable

Market CommentaryEuro to The Pound Today Rises, as MPs Reject Brexit Timetable
Euro to The Pound Today Rises, as MPs Reject Brexit Timetable
Euro To The Pound Today.

The euro to the pound interbank exchange rate has risen by +0.92% in the last day, from a low of 0.8579 yesterday to 0.8658 today at the time of writing.

This could benefit you, when you transfer money to the UK from the Eurozone, because you might now get a higher sterling total, compared to if you’d exchanged currencies yesterday.

In turn, this might make it more profitable for you if you’re selling property abroad in Spain or France, or if you’re a Eurozone business owner making international payments to the UK.

To stay up-to-date with the euro to 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 interbank rates.

Also, to check what’s affecting the value of the Eurozone’s common currency versus British sterling recently, go to our EUR to GBP Exchange Rate Updates page. Here, click on the latest news.

One reason why the EUR has gained in value versus the GBP is because, yesterday, MPs in the UK Parliament voted to reject UK Prime Minister (PM) Boris Johnson’s Brexit agreement timetable.

Also, looking to later this week, the euro to pound interbank exchange rate could be affected, because MPs might now use this chance to try and amend Mr. Johnson’s deal, with new clauses.

In addition, looking to the foreseeable future, the euro’s value against sterling may be influenced, because it’s thought that following yesterday’s vote, a UK general election now looks far likelier.

Euro Rates Today Rises, as MPs Reject Boris’s Brexit Timetable

As I mention, one reason why the euro to the pound interbank exchange rate has strengthened is because, yesterday, MPs in the House of Commons voted against PM Johnson’s Brexit timetable.

As a result, it’s now thought likely that Mr. Johnson will negotiate for Article 50, the UK’s Brexit deadline, to be extended beyond its current limit of October 31st, most likely by three months.

To explain, yesterday MPs voted on two motions, firstly the UK’s Brexit legislation, called the Withdrawal Agreement Bill (WAB), and secondly the timetable for the WAB to pass from the House of Commons to the House of Lords.

MPs voted by 329 votes to 299 to pass the WAB, a larger than expected majority, suggesting that there’s clear support in Parliament to pass Mr. Johnson’s deal.

However, MPs rejected Mr. Johnson’s planned WAB timetable by 322 votes to 308. This is because, first, the WAB is a 110-page document detailing the legal and constitutional effects of Brexit, according to CNN International.

Yet the PM wanted MPs to read, analyse and vote on this historical document in just three days, by Thursday. So MPs rejected the proposed timetable, for not giving them enough time with the WAB.

Second, MPs also rejected the WAB, because according to its terms, if the UK and EU haven’t negotiated a trade deal by the end of 2020, the UK could still exit Europe with ‘No Deal’.

The EU’s Chief Brexit Negotiator, Michel Barnier, said recently that negotiating a new trade deal could take three or more years. So MPs rejected the WAB’s timetable, as it’s unrealistic about trade talks.

There’s reason to be optimistic about MPs’ votes yesterday. After all, as Morten Lund at Nordea Markets says, "For the first time ever, a majority was found for a Brexit deal” in the House of Commons.

Moreover, according to the financial markets, there’s a 66% chance that the UK and EU will agree a deal. So the odds that the UK will exit with ‘No Deal’ still look increasingly low.

However, as a result of MPs’ decision to vote down the WAB timetable, it’s now very likely that PM Johnson will negotiate a Brexit extension beyond this month, likely to January 31st.

In particular, Mr. Johnson told Parliament yesterday that he’ll “pause” the process of ratifying his Brexit deal, to ask Brussels for a “short, technical extension”, so that MPs can digest the WAB.

Paul Dales, Chief UK Economist with Capital Economics, writes that: "A delay to Brexit now appears the most likely scenario and the chances of a near-term deal have diminished a bit.”

“A short delay to finalise a deal would not be a blow to economic growth, especially if it were followed by a deal that would eventually prompt it to rise." So the world’s investors remain upbeat about Brexit.

That said, the euro to the pound today has strengthened, because many global money managers had hoped that Brexit could pass Parliament this week, to be finalised by October 31st.

Instead, it looks increasingly probable that the UK will remain part of the EU for another three months. This adds somewhat to the UK’s political uncertainty, so has lifted the value of the EUR versus GBP.

EUR to GBP Rate Could Be Affected, if MPs Try to Amend Brexit Deal

However, looking to the foreseeable future, the euro to the pound interbank exchange rate could be affected, because it looks likely that opposition MPs will use the WAB’s passage through Parliament, to try and amend Mr. Johnson’s Brexit deal.

In this case, the likelihood that the PM’s agreement will pass smoothly through Parliament may fall, as MPs dispute over the form of Brexit.

In particular, the opposition Labour Party’s Brexit Spokesman, Sir Keir Starmer, has said that Labour will try to add an amendment, in which all of the UK remains in the EU’s Customs Union after we leave, not just Northern Ireland, and for a second referendum on Mr. Johnson’s Brexit deal, reports The Guardian newspaper.

Mr. Starmer argues that this is to legitimise Mr. Johnson’s finalised deal among the British public.

Labour will have the chance to amend the WAB, when it returns to the House of Commons, for its so-called “third reading”, its final round of MPs’ scrutiny.

Moreover, given that Mr. Johnson leads a minority Conservative government, in which opposition MPs have frequently clubbed together to amend the PM’s legislation, it’s possible that Labour may succeed in adding these amendments.

That said, if Labour adds amendments to Mr. Johnson’s Brexit deal, like a Customs Union or second referendum, the PM is likelier to withdraw the bill rather than allow it to pass.

These would leave Parliament, as well as Brexit, in a form of stalemate, where Mr. Johnson has finalised a Brexit deal with the EU, yet doesn’t have the support in Parliament to pass it with just his own MPs.

For example, Morten Lund, at Nordea Markets says that "There is no guarantee that the deal could eventually pass in a so-called third reading where it would be subject to amendments.”

“Most likely such amendments would include both a confirmatory referendum and a deal with a customs union attached which, if passed, could lead to Conservative Brexiteers rejecting the WAB altogether," added Mr. Lund.

This could affect the value of the euro versus the pound, because if the financial market see that the UK’s Brexit situation complicates further, they may feel that a ‘No Deal’ Brexit is likelier.

What’s more, the longer that Brexit drags on, UK businesses may be less likely to hire new employees or invest in new equipment, slowing the UK’s future GDP (Gross Domestic Product) growth.

Euro’s Value Versus Sterling Might Be Influenced, as UK General Election Likelier

Furthermore, the euro to the pound interbank exchange rate could also be influenced, because if PM Johnson considers that opposition MPs may amend his Brexit deal, he may try to resolve the situation by calling a UK general election, reports the BBC.

After all, this would allow the PM the chance to regain his lost Parliamentary majority, so as to pass laws with Tory MPs without opposition interference.

It’s thought likely that PM Johnson will try to call a general election in 2019, because according to reports, Conservative Party headquarters is gearing up for a vote before Christmas.

For instance, a Downing Street source yesterday said it’s time to ask voters if they want "to get Brexit done with Boris or spend 2020 having two referendums on Brexit and Scotland with Jeremy Corbyn".

However, it’s worth noting that, although Mr. Johnson may wish to call a general election, to get Brexit done, his options are limited, under the UK’s Fixed Terms Parliament Act.

According to this law, the UK can only go to the polls every five years, unless 2/3rds of MPs agree otherwise. So even to call a general election, Mr. Johnson is subject to Labour’s and the opposition’s preferences.

Moreover, even if the PM succeeds in calling an election, this may further contribute to the UK’s political uncertainty.

For example, Paul Dales at Capital Economics says a general election "would prolong the current uncertainty that is acting as a handbrake on the economy and holding down the pound."

So to conclude, if MPs continue to debate Brexit, without approving it, and they decide to hold a general election in the meantime, the UK’s political outlook would remain unclear. This may affect 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.

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