The pound to euro interbank exchange rate stands at 1.1594 today at the time of writing. This is just 0.47% below sterling’s 24-week high versus the Eurozone’s common currency, its strongest since May 8th, reached last Monday 21st October, at 1.1649.
By comparison, back on August 10th, the pound was as weak as 1.0646 versus the euro. So since then sterling has risen by close to 10 cents, or by +8.9%.
To stay up-to-date with the sterling vs euro interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, scroll down to the ‘Latest Market Rates Widget’ to see this week’s interbank rates.
Also, to check what’s affecting the value of the pound versus the Eurozone’s common currency, go to our GBP to EUR Exchange Rate Updates page. Here, simply click on the most recent news.
One factor that may influence the pound to euro interbank exchange rate is the fact that, today, UK Prime Minister (PM) Boris Johnson will again try to call a general election, for early December.
However, if Mr. Johnson succeeds in calling a general election today, there’s no guarantee that his Conservative Party would win a Parliamentary majority, which may impact the value of sterling.
Sterling Vs Euro: Boris to Try and Call General Election Today
As I mention, one factor that could affect the pound euro exchange on the interbank market today is the fact that PM Johnson will ask MPs in the House of Commons to back a general election today.
This will be Mr. Johnson’s second attempt to call an election in the last two days, and though the PM failed yesterday, it’s thought that today Mr. Johnson may gain opposition support.
To explain, on Monday 28th PM Johnson tried to call an election, under the UK’s Fixed Terms Parliament Act. According to this law, the UK can only hold an election every five years, unless 2/3rds of MPs vote otherwise.
Mr. Johnson leads a minority Conservative government, in which fewer than half of MPs belong to his party, so the PM needs opposition MPs’ votes to call an election.
Mr. Johnson wishes to call a general election, first because he leads a minority government. This means that the opposition political parties can gang up, to take control of Parliament’s legislative agenda from the PM.
In fact, the opposition has done this repeatedly, for example to pass the Benn Act. This obliged Mr. Johnson to ask for another Brexit extension, last Saturday 19th October.
Second, the PM wishes for the great British public to go to the ballot boxes, so that he can “get Brexit done”. After all, Mr. Johnson has finalised a Brexit deal, yet so far, opposition MPs have refused to pass it, until they can scrutinise it more closely.
According to the PM, every month without a Brexit deal costs the UK a billion pounds, so he’s eager to move onto other issues now.
Lastly, Mr. Johnson wants to hold a general election, because he’s leading in the opinion polls, according to most surveys. For example, according to the Opinium poll this Sunday, the PM has a lead of 16 points over Jeremy Corbyn’s Labour Party.
So in theory, this would enable Mr. Johnson to win an ample Parliamentary majority, to easily pass Brexit and other new laws. This may affect the pound to euro interbank exchange rate.
GBP to EUR Could Be Influenced, if Lib Dems and SNP Vote for Election
The PM tried to call a general election yesterday, under the Fixed Terms Parliament Act. Yet just 299 MPs supported Mr. Johnson’s call, 135 votes short of the 2/3rds majority needed.
So today, Mr. Johnson will try again, this time seeking to amend the law, so that an election can be called if a simple majority of MPs vote for it. On Monday, the PM was 21 votes short of a majority.
Crucially, two smaller opposition parties, the Liberal Democrats (Lib Dems) and Scottish National Party (SNP) have said that they may support Mr. Johnson’s call today, according to The Guardian newspaper.
In part, this is because both the Lib Dems and SNP have risen significantly in the polls in recent months, on an anti-Brexit platform, in part at Labour’s expense. So they’re eager to capitalise on this fresh popularity.
However, while Mr. Johnson wishes to hold an election on December 12th, to give the government time to pass Northern Ireland’s budget before dissolving Parliament, the Lib Dems oppose this.
This is because most universities end term on December 13th, so the Lib Dems feel that an election the day before would reduce the student vote. The Lib Dems prefer an election on December 9th.
In addition, both the Lib Dems and SNP want assurances that, if they support Mr. Johnson’s call for a general election, he won’t try to pass his Brexit deal in the meantime.
Yesterday, the Leader of The House of Commons, Jacob Rees-Mogg, offered these assurances to MPs. Yet both the smaller opposition parties want a “cast-iron guarantee” that the PM won’t break his promise here.
Meanwhile, whether Labour will support today’s call for a general election is unclear. According to Mikael Olai Milhøj, an analyst at Danske Bank, "Labour MPs are divided on whether to support an election, as some fear to lose their seats and that PM Johnson may win a landslide victory.”
So we’ll see if Mr. Corbyn’s party decides to go to the ballot boxes, when the vote is called today.
So to sum up, the PM will try to call a general election today, and it looks increasingly likely that the Lib Dems and SNP will support this.
However, for Mr. Johnson to win these parties’ support, they must first decide on the election date, while the PM must promise not to try and pass his Brexit deal in the meantime. This development could affect the pound on the interbank market.
Pound Euro Exchange May Be Affected, as No Guarantee Boris Will Win Election
However, looking to the coming weeks, if PM Johnson succeeds in calling an election today, there’s no guarantee that he’d win a Parliamentary majority, either on December 9th or 12th.
Moreover, historically, sterling tends to weaken when the UK holds a general election, as it’s a time of considerable uncertainty in the UK’s political and economic outlook, which investors are aware of.
To begin, although PM wants voters to go to the polls so that the Conservatives can win more MPs, there’s no telling whether he’d get his wish.
After all, if the UK holds an election in December, Brexit would remain unfinished. In this case, it’s possible that Nigel Farage’s Brexit Party may gain votes at the Tory Party’s expense. In this case, Mr. Johnson may have to rule in a coalition.
What’s more, it’s worth remembering that, even though former PM Theresa May had a clear lead in the opinion polls, when she decided to call a general election in 2017, she then lost out.
In fact, Mrs. May lost the Conservatives’ Parliamentary majority at that election and was forced to sign a formal pact with Northern Ireland’s Democratic Unionist Party (DUP) to be able to govern.
In addition, it’s conceivable that, even though Labour is behind in the polls right now, Mr. Corbyn’s party could nonetheless triumph in an election, and perhaps form a coalition government with the Lib Dems or SNP.
In this case, Mr. Corbyn might wish to renegotiate Brexit again, or introduce policies that it’s thought may weaken the UK’s economic growth, such as more red tape for businesses.
In the meantime, even though the EU yesterday extended the UK’s Brexit deadline by three months, up to January 31st, the clock is ticking down.
Mr. Johnson hopes that holding a general election will ultimately enable him to finish Brexit, to move on to negotiating the UK’s and EU’s future trade deal, and the UK’s domestic agenda. Yet there’s no guarantee that this will happen.
So in brief, if Mr. Johnson succeeds in calling an election today, it may add to the UK’s political uncertainty in the foreseeable future. After all, depending on which political party wins, the outcome of Brexit may change significantly.
Alternatively, it’s possible that, even after an election, Parliament may remain at stalemate. This may affect the sterling vs euro interbank exchange rate.
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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.