The pound to euro interbank exchange rate stands at 1.1147 today at the time of writing. This is just -0.26% below sterling’s recent high versus the euro, its strongest since July 25th, reached last Thursday 5th September, at 1.1177.
By comparison, back on August 10th, the pound was as weak as 1.0646 versus the common currency. So sterling has since risen in value by +4.7%, or by close to five cents.
This could be of interest to you, if you’re a Briton making Regular Payments to the Eurozone to pay your Spanish or French mortgage, or a you’re an Online Seller exchanging pounds to euros.
In turn, this might make it cheaper for your to pay your Spanish or French mortgage, or make it more profitable for you to exchange pounds to euros from your sales as an Online Seller.
To stay updated with sterling’s value against the euro on the interbank market, visit Pure FX’s Rates & Tools page. Here, scroll to the Latest Market Rates Widget for this week’s interbank rates.
Also, to check what’s affecting the value of the pound against the common currency, visit Pure FX’s GBP to EUR Exchange Rate Updates page. Here, simply click on the most recent article.
A first reason why the pound euro exchange rate has neared this six-week high on the interbank market is because opposition MPs’ bill to block a ‘No Deal’ Brexit looks set to become law today.
However, looking forward, the sterling vs euro interbank exchange rate might be influenced, if Prime Minister Boris Johnson ignores the law to extend the Brexit deadline, or he calls a general election.
In addition, the pound’s value against the common currency could be affected, if UK economic data due for release this week, such as UK unemployment, continues to show that the UK economy is slowing.
Please find below a further explanation of why the pound to euro interbank exchange rate has neared this six-week high. You may find this helpful, for when you transfer money abroad soon.
Sterling Vs Euro Rises, as Bill Blocking ‘No Deal’ to Become Law
As I’ve mentioned, a first reason why the pound euro exchange rate has neared this six-week high on the interbank market is because MPs’ bill to block a ‘No Deal’ Brexit looks set to become law today.
This has lifted sterling versus the common currency, because it’s thought that if the UK eventually exits the EU with an agreement, this will favour the UK’s future economic growth.
Last Tuesday and Wednesday, MPs in the House of Commons took control of the legislative agenda from the government, and voted to extend Article 50, the UK’s Brexit negotiating timetable, beyond its current deadline of October 31st.
Last Friday, the House of Lords passed the bill, and today, the Queen is expected to give the bill her Royal Assent, so that it enters the statute books, according to the Express newspaper.
The bill obliges Prime Minister Boris Johnson to return to Brussels, to ask the European Union (EU) for more time for the UK to negotiate Brexit, during which period the UK will remain in the EU.
MPs wish to extend Article 50 by three months, up to January 31st, to give themselves time to discuss what sort of Brexit they want, arrange a second referendum, or call a general election.
The financial markets have bought sterling following the news that MPs’ bill will become law today, thereby lifting the pound’s value, because it’s thought that, if there’s a Brexit deal, this will ultimately benefit the UK’s economy.
After all, we currently do roughly half our international trade with the EU, while the gains from any post-Brexit trade deals with other countries are for the moment theoretical.
In addition, money managers have also taken comfort from the fact that MPs’ latest effort to prevent a ‘No Deal’ Brexit is a law, unlike their previous attempts, which were non-binding votes.
This is because this law obliges Prime Minister (PM) Boris Johnson to go to Brussels to request an extension to Article 50. Mr. Johnson can’t bypass this law without presumably committing a crime.
So for the moment, it looks likelier than not that the UK will at some point exit the EU with an agreement. This will contribute to the UK’s economic stability and continuity, thus lifting the pound.
Sterling Vs Euro Could Be Affected, as Boris May Ignore Law, Push for Election
However, it’s worth mentioning that, just because MPs’ bill preventing a ‘No Deal’ Brexit looks set to become law today, the UK’s political outlook is by no means settled.
In particular, PM Johnson hasn’t confirmed that he’ll obey MPs’ new law, and it’s thought likely that Mr. Johnson will continue to push for a general election before October 31st, to try and regained the Brexit initiative, reports the BBC.
To begin with, Mr. Johnson said in a speech in Yorkshire last Thursday that he’d rather “be dead in a ditch” than return to Brussels to request an extension to Article 50.
This is because the PM has repeated countless times in recent weeks that the UK will exit the EU on October 31st “come what may, do or die”, “no ifs, no buts”. So for the PM to change tac now would be a hard reverse.
On the other hand, were Mr. Johnson to resign as PM to legally avoid enforcing MPs’ law to extend Article 50, Mr. Johnson would be the shortest-serving PM in British history.
It’s well-known that Mr. Johnson has wanted to be PM for most of his adult life, so it’s unlikely that he’ll vacate 10 Downing Street so quickly. Instead, the PM will seek to call an election, before the current Brexit deadline.
The PM tabled a motion calling for a general election last Wednesday, but this was voted down by opposition MPs. Under the UK’s Fixed Terms Parliament Act, an election can only happen every five years, unless 2/3rds of MPs agree otherwise.
It’s thought that Mr. Johnson will table another motion for an election today, to avoid requesting a Brexit extension, while staying within the law.
Opposition MPs, including Labour Party leader Jeremy Corbyn and Liberal Democrats leader Jo Swinson, have said that they’ll only accept calls for an election, once the bill blocking a ‘No Deal’ becomes law.
As I’ve mentioned above, the Queen is due to give this bill her Royal Assent today, so it’s possible that MPs might accept Mr. Johnson’s call for an election in the near future, perhaps today.
Were we to hold a general election in 2019, the UK’s political outlook would be thrown up into the air again, even though a ‘No Deal’ Brexit looks less likely.
For example, would an election be held before or after the current October 31st Brexit deadline? The PM wants to go the ballot boxes before, opposition MPs after. Also, can Mr. Johnson regain his lost Parliamentary majority?
So if and when the House of Commons agrees to an election, this would contribute to the UK’s political uncertainty. In turn, this could affect the value of sterling.
Pound Euro Exchange Rate Might Be Influenced, as UK Economic Data Mixed
Furthermore, another factor that could influence the value of sterling versus the euro on the interbank market, looking ahead, is the fact that the UK’s economic performance recently has been mixed.
Last week, we learnt that the UK’s manufacturing, construction and services PMIs (Purchasing Managers Indices) fell further, although data this morning has been more encouraging.
According to the Office for National Statistics (ONS) this morning, UK GDP (Gross Domestic Product) surprisingly expanded by +0.3% in July month-on-month. This is well above financial market forecasts for just +0.1% growth, as well as June’s flat 0.0% expansion.
These upbeat statistics suggest that the UK economy may be further from recession than data last week had suggested.
Also, this morning we’ve learnt that UK Manufacturing Production unexpectedly increased by +0.3% in July compared to June, above economists’ predictions for a -0.1% fall.
By comparison, the month before, UK factory output had fallen by -0.2%. So again, this points to unexpected resilience in the UK’s economy, even though UK GDP fell by -0.2% in Q2, between April and June, and what with Brexit uncertainty.
However, it’s worth noting that the UK’s manufacturing and construction sectors remain in deep contractions, according to IHS Markit’s respected releases last week.
Meanwhile, the UK’s vast services sector, which makes up 80% of the UK’s economic output, fell to just 50.6 in August. This is barely above the 50.0 figure that separates economic growth from contracting output.
Tomorrow, on Tuesday 10th September, we’ll learn the UK Unemployment Rate for the three months to July, as well as UK Average Earnings. It’s thought that UK joblessness remains at its joint-lowest since the mid-1970s, at just 3.9%.
Meanwhile, it’s forecast that UK wages grew by +3.8% in the three months to July, close to 10-year highs. These statistics will give us a fuller picture of the UK’s recent economic performance, and may influence the pound too.
Get A Free Exchange Rate Quote
Get a free exchange rate quote to get a competitive exchange rate, and find out how much you could save with Pure FX.
You’ll get a competitive exchange rate for your money transfer.
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.