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Pound Euro Exchange Rate Rises, as MPs Block ‘No Deal’

Market CommentaryPound Euro Exchange Rate Rises, as MPs Block ‘No Deal’
Pound Euro Exchange Rate Rises, as MPs Block ‘No Deal’
Pound Euro Exchange Rate.

The pound to euro interbank exchange rate has hit 1.1144 today at the time of writing. This is +0.82%, or close to one cent, higher than yesterday, when sterling was as low as 1.1053.

This might benefit you, if you’re a Briton planning on buying property abroad in Spain or France, or a British business owner importing Eurozone goods or services to the UK for your customers.

This is because, when you transfer money to your Spanish or French bank account from the UK, you might now get a higher euro total. This is compared to if you’d exchanged pounds for euros yesterday.

In turn, this could make buying a Spanish or French holiday home cheaper for you, or make it more affordable for your business to import European products, such as Spanish chorizo, French cheese or Italian wine.

To stay up-to-date with the pound to euro interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, scroll down to the Latest Market Rates Widget, to see today’s exchange rate and for the last week.

Also, to check what’s affecting the value of the pound versus the euro, visit our GBP to EUR Exchange Rate Updates page. Simply click on the latest article to see what’s influencing British sterling versus the common currency.

A first reason why the pound euro exchange rate has rebounded in the past day is because, yesterday evening, MPs in the House of Commons voted by a large majority to try and block a ‘No Deal’ Brexit.

A second explanation why the pound sterling has strengthened in value versus the euro is because, on Thursday, the EU’s Chief Brexit Negotiator, Michel Barnier, said that he’s open to exploring alternatives to the Northern Irish backstop.

Let’s take a closer look at these reasons why the pound tu euro interbank exchange rate has risen in the past day. You might find this helpful, for when you decide to transfer money to the UK this year.

Pound Euro Exchange Rate Rises, as MPs Block ‘No Deal’ Brexit

As I mention, a first reason why the pound to euro interbank exchange rate has strengthened in the last 24 hours is because, on Thursday evening, MPs in the House of Commons voted to try and block a ‘No Deal’ Brexit.

It’s now far more difficult for the next UK Prime Minister, likely Boris Johnson, to suspend or prorogue Parliament to force through a ‘No Deal’ Brexit. This is because this amendment obliges MPs to sit in the run up to the Brexit deadline, ostensibly to discuss Northern Ireland’s executive, reports the BBC.

In particular, MPs voted to amend a forthcoming law regarding Northern Ireland. According to the amendment, the government is now obliged to inform MPs about its progress setting up the next Northern Ireland executive every fortnight.

If Parliament is suspended or prorogued when the government is due to present its report, then the House of Commons must sit, so that MPs can debate the government’s progress.

To be specific, the amendment stops Parliament from being suspended, from the period of October 9th 2019 to December 18th 2019. This encompasses the date of the UK’s extended Brexit deadline, on October 31st.

The amendment passed by a surprisingly large 41 votes in the House of Commons on Thursday evening. In particular, four Cabinet Ministers abstained from the bill, namely the International Development Secretary Rory Stewart, Business Secretary Greg Clark, Justice Secretary David Gauke, and Chancellor Philip Hammond.

Also, 17 Conservative MPs voted against the government, to support the amendment. This tells us that, even among Tory MPs, there’s considerable support to ensure that Parliament debates what sort of Brexit we decide, and avoid forcing through a ‘No Deal’.

The Minister for Digital, Culture, Media and Sport, Margo James, resigned her position to support the amendment, against the government. Mrs. James told the BBC that it’s “too extreme” to prorogue Parliament, while adding that: "I thought the time was right today to join people who are trying to do something about it."

The passing of this amendment has lifted the pound, first, because it demonstrates that there’s still a clear majority of MPs in Parliament who wish to avoid a ‘No Deal’ Brexit. This increases the likelihood that the UK will eventually reach a deal with Brussels for its EU exit.

Second, this amendment has strengthened the value of sterling, because it contributes to tie likely next Prime Minister Boris Johnson’s hands. Mr. Johnson will now find it much tougher to suspend Parliament in the run-up to October 31st, to prevent MPs rejecting to a ‘No Deal’ Brexit.

Sterling tends to rise when a ‘No Deal’ Brexit looks less likely, because this makes it more probable that the UK will retain economics and political ties to the EU after we leave. In turn, this will ensure that it remains easy to trade with European businesses in future, contributing to increase the UK’s economic prosperity.

GBP to EUR Rate Increases, as Barnier Open to Change Backstop

Furthermore, another reason why the pound euro exchange has rebounded in the past day is because the EU’s Chief Brexit Negotiator, Michel Barnier, said yesterday that he’s open to discussing alternatives to the planned Northern Irish backstop, reports Bloomberg.

According to the backstop, if the UK were to exit the EU without a deal, then Northern Ireland would remain in the EU’s Customs Union. This is to ensure that there’s no border between Ireland and Northern Ireland, to protect peace between the two countries.

In particular, the backstop is meant to prevent a return to sectarian violence on the island of Ireland, and respect the terms of the 1998 Good Friday Agreement. The backstop is considered an integral part of the Brexit negotiations.

However, were Northern Ireland to be forced to remain in the EU’s Customs Union, then the rest of the UK would remain too. This is to protect the UK’s economic integrity. For this reason, many MPs consider the backstop a way to retain control of the UK, by the back door.

The House of Commons’ objection to the backstop is the main reason why MPs voted down outgoing Theresa May’s draft Brexit agreement three times, and why the UK had to extend its original Brexit deadline, from March 31st to October 31st.

To try and win the support of MPs, and get Brexit done, both candidates to become Prime Minister, ex-Mayor of London Boris Johnson and Foreign Secretary Jeremy Hunt, have promised to abandon the backstop. In particular, earlier this week, Mr. Hunt told a The Sun debate that the backstop is “dead”.

As a result, the EU’s Brexit Negotiator Mr. Barnier has now conceded that he’s willing to consider alternatives, to increase the likelihood that the UK reaches a deal with the EU for after Brexit, given the UK’s strong opposition to the backstop.

Speaking to BBC Radio 4 on Thursday afternoon, Mr. Barnier said that he’s willing to work on “alternative arrangements” to those agreed with outgoing Prime Minister Mrs. May.

Following Mr. Barnier’s comments, Ireland’s Prime Minister Leo Varadkar echoed these sentiments. Mr. Varadkar told RTE yesterday that: “there are a few ways to avoid a hard border and if there are proposals that genuinely find a solution, we will listen to them.”

Mr. Barnier’s and Mr. Varadkar’s comments have strengthened the pound, because they suggest that, even while the next UK Prime Minister looks likely to take a tougher stance toward Brexit, the EU remains willing to negotiate, to find an acceptable compromise.

The EU’s Chief Negotiator’s and Irish Prime Minister’s comments have reassured the financial markets that the UK will retain ties to the EU after Brexit, once the backstop is finalised. This has contributed to lift the value of British sterling versus the Eurozone’s common currency.

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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 email peter.lavelle@purefx.co.uk.

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