The pound to euro interbank exchange rate stands at 1.1198 today at the time of writing. This is just -0.2% below sterling’s recent high versus the common currency, reached this Monday 9th August, its strongest in 11 weeks, of 1.1221.
By comparison, back on August 10th, sterling was as weak as 1.0646 versus the euro. So in the month since, the pound has risen by +5.18%.
This could benefit you, if you’re a Brit emigrating to the Eurozone, perhaps to Spain’s Costa Blanca or France’s Cote d’Azur to retire, or you’re a British CEO buying currency for your business.
This is because, when you exchange pounds for euros, you might now get a higher euro total in your Eurozone bank account, compared to if you’d transferred money in the last 11 weeks.
In turn, this might make it more affordable for you to emigrate to Valencia or Andalusia to relax under the Spanish sun, or reduce your international payments costs to import Eurozone goods.
To stay up-to-date with the sterling vs euro interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, scroll to the Latest Market Rates Widget for this week’s GBP to EUR interbank rates.
Also, to check what’s influencing the value of the pound against the Eurozone’s common currency, visit our GBP to EUR Exchange Rate Updates page. Here, simply click on the latest article.
A first reason why the pound to euro interbank exchange rate has neared this 11-week high today is because, speaking yesterday, UK Prime Minister Boris Johnson pledged to reach a Brexit deal.
However, looking forward, sterling’s value could be affected, because yesterday, Bank of England Governor Mark Carney warned that the pound is behaving like an emerging market currency.
Also, looking to the foreseeable future, the sterling vs euro interbank exchange rate may be influenced, because the EU says that they’re still waiting for the UK’s revised Brexit proposals.
Please find below a closer look at these reasons why the pound to euro interbank exchange rate has neared this 11-week high. You may find this helpful, for when you transfer money abroad.
Sterling Vs Euro Rises, as Boris Pledges to Seek Brexit Agreement
As mentioned, one reason why the pound to euro interbank exchange rate has neared this 11-week high is because, yesterday, UK Prime Minister (PM) Boris Johnson made a renewed pledge to reach a Brexit agreement with the European Union (EU).
This has supported the value of sterling, because it’s thought that this makes a ‘No Deal’ Brexit increasingly unlikely.
Speaking on Tuesday 10th at the close of Parliament, Mr. Johnson told MPs that: "This government will press on with negotiating a deal, while preparing to leave without one,” reports The New York Times newspaper.
The PM added that: "I will go to that crucial summit on October the 17th and no matter how many devices this parliament invents to tie my hands, I will strive to get an agreement in the national interest.”
Mr. Johnson’s remarks have lifted investors’ hopes that the PM is now committed to reaching a Brexit deal, following Mr. Johnson’s recent repeated defeats in Parliament over Brexit.
In the last week, there have been six votes in the House of Commons, and Mr. Johnson has lost them all, obliging the PM to ask the EU for an extension to Article 50, the Brexit negotiating deadline.
In addition, earlier this week the PM appeared newly committed to reaching a Brexit deal, while meeting Ireland’s Prime Minister Leo Varadkar in Dublin.
Following the two leaders’ meeting, Mr. Johnson told a press conference that it “would be a failure of statecraft” if there were a ‘No Deal’ Brexit, while adding that “I want to get a deal”. So Mr. Johnson appears newly optimistic.
It’s worth adding that Parliament has now been prorogued, or suspended, until October 14th, following Mr. Johnson’s instructions. MPs’ last act was to pass a bill preventing a ‘No Deal’ Brexit.
Given this, it’s hoped that the PM will spend the next month negotiating in earnest with the EU, to extend the UK’s Brexit deadline as he’s legally obligated to do, and for a deal. This has supported sterling.
Pound May Be Affected, as Carney Says Sterling Behaving Like EM Currency
That said, looking ahead, the pound to euro interbank exchange rate could be influenced, first because, yesterday, Bank of England (BoE) Governor Mark Carney said that the pound has been behaving like an emerging market (EM) currency.
This could affect the value of sterling, because Mr. Carney’s remarks suggest that the Brexit uncertainty is making sterling unusually volatile.
Speaking in New York on Tuesday, Mr. Carney said that the “Brexit-hit pound looks like an emerging market currency”, according to respected financial news source Bloomberg.
The BoE Governor added that: “Sterling volatility, as you would know, is at emerging market levels and has decoupled from other advanced economy pairs for obvious reasons.” This tells us that Brexit has caused the pound to fluctuate more than normal recently.
In addition, Mr. Carney remarked that: “A variety of other indicators show financial markets are going to move substantially in one way or another depending on the outcome of Brexit.”
This is to say that, depending on whether the UK exits the EU with a deal or not, we might expect UK financial assets, including sterling, to move “substantially” higher or lower with the eventual outcome.
For example, it’s worth noting that, simply because PM Johnson pledged to seek a Brexit deal in Parliament yesterday, he also said that he wouldn’t extend the UK’s Brexit deadline, in spite of the new law.
To be specific, Mr. Johnson said that: “This government will not delay Brexit any further” beyond the current deadline of October 31st, even though he’s now legally obliged to do so.
Moreover, Mr. Johnson’s Foreign Secretary, Dominic Raab, told Parliament on Monday that, while the government would respect Parliament’s sovereignty, "sometimes it can be more complex because there are conflicting laws or competing legal advice."
This suggests that Mr. Johnson’s government may seek a legal loophole to avoid extending Article 50, which may affect sterling.
GBP to EUR May Be Influenced, as EU Awaits UK’s Revised Brexit Proposals
Furthermore, looking to the foreseeable future, another factor that may affect the sterling vs euro interbank exchange rate is the fact that the EU is still awaiting the UK’s revised Brexit proposals.
This tells us that, while PM Johnson has pledged to seek a Brexit deal, while somehow legally avoiding extending the October 31st deadline, he’s yet to suggest any concrete changes.
For example, European Commission (EC) spokeswoman Natasha Bertaud said recently that: "for progress to be made in the talks, it remains crucial that the EU does receive concrete proposals on all changes that the UK would like to see, of course in compatibility with the withdrawal agreement,” reports Economic Times.
So we know that Mr. Johnson’s government is yet to put forward any specific amendments.
Meanwhile, the European Parliament’s President, David Sassoli, commented that: "everything seems to be rather confused. It's very difficult to understand what the British government and Parliament want to do right now."
This tells us that, what with Parliament voting against Mr. Johnson and him losing his majority, it’s unclear if the PM has the full authority to negotiate Brexit.
Also, it’s worth noting that senior Conservative MP Amber Rudd announced her resignation last week, in part because she says that there’s no evidence that Mr. Johnson’s government is negotiating with the EU.
This is even though Mr. Johnson’s chief negotiator, David Frost, is meeting EU officials several times a week for technical talks, at the EC’s headquarters in Brussels.
One of the changes being proposed to resolve the UK’s Brexit uncertainty is to amend the proposed Irish backstop, so that it applies to Northern Ireland only, rather than the whole UK.
In this case, Northern Ireland would remain in the EU’s Customs Union, to avoid setting up a hard border on the island of Ireland, while the rest of the UK could pursue trade deals with other countries.
Yet Mr. Johnson’s government has denied that it’s seeking this outcome, while Northern Ireland’s Democratic Unionist Party (DUP) have said that they’d block such proposals. This is because they’d constitutionally separate Northern Ireland from the rest of the UK.
With this in mind, the EU continues to await the UK’s proposed Brexit amendments, which could influence the value of 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.