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Pound Euro Exchange Update: MPs Vote Down Brexit Options

Market CommentaryPound Euro Exchange Update: MPs Vote Down Brexit Options
Pound Euro Exchange Update: MPs Vote Down Brexit Options
GBPEUR Interbank Exchange Rate. Image credit: Succo.

The pound euro exchange interbank rate is at 1.1726 this morning, very close to where it stood this time yesterday.

That said, at 19.10 GMT last night, sterling jumped to 1.1782 versus the euro, its strongest since May 14th 2017, a 22-month high, before then falling again to where it had begun 3 hours later, by 22.10 GMT.

Why this sharp intraday move? Well, because the UK's Brexit negotiations continue to thrill then disappoint the financial markets.

In particular, on Wednesday Parliament voted against all the possible forms of Brexit, while Prime Minister Theresa May pledged to stand down, if MPs support her draft Withdrawal Agreement. Let's take a closer look at these factors.

Beforehand, it's important to note that, even with sterling's sharp intraday movement yesterday, the pound to euro interbank exchange rate has still gained significantly so far this year.

To be specific, sterling has risen from 1.1087 on January 1st up to its current 1.1726, a gain of +5.76%. This may interest you if you intend to transfer money to Spain or France this year.

Pound Euro Exchange Rate Rises Then Falls, as MPs Vote Down Brexit Options

Sterling jumped then fell against the euro on Wednesday evening, to conclude roughly where it had begin, because MPs in Parliament voted against the Brexit options.

In particular, yesterday the House of Commons held votes on all the possible forms of Brexit, such as staying in the EU's Single Market, the Customs Union, revoking Article 50, or holding a new referendum. Yet none of these possibilities gained a majority among MPs, according to The Guardian.

This has raised the uncertainty among financial markets about the UK's Brexit outlook. So this contributed to first lift then bring down the pound to euro exchange rate yesterday.

PM May's Resignation Pledge May Influence Pound to Euro Rate

In addition, a further factor that's affected the pound to euro interbank exchange rate in the last day, and could influence the exchange rate in future, is Prime Minister Theresa May's pledge to resign.

On Wednesday, at a meeting of the Conservative Party's 1922 Committee, Mrs. May promised to leave her post before the next phase of Brexit negotiations begin, if MPs pass her draft Brexit deal in the coming days or weeks, reports The Washington Post.

Mrs. May made her pledge, in the hope that this would convince MPs who've previously opposed her deal to change their minds, such as the "hard Brexiteer" European Research Group (ERG) or the Conservative Party's Northern Irish allies, the Democratic Unionist Party (DUP).

Following Mrs. May's announcement, MPs who've previously opposed the Prime Minister's draft deal, such as former Foreign Secretary Boris Johnson, promised their support.

This suggests that the Mrs. May's pledge has had a constructive effect in convincing Parliament to pass her draft agreement. So this is positive for the UK's Brexit outlook.

That said, following Mrs. May's promise, the DUP announced that it's still unable to support the Prime Minister's draft deal. This is because the draft Withdrawal Agreement might still leave Northern Ireland caught in the EU's Customs Union, the so-called "backstop".

In particular, DUP leader Arlene Foster told the BBC on Wednesday night that "we're in a situation where we cannot sign up to the Withdrawal Agreement, and it's all because the prime minister decided to go for that backstop."

In addition, following Mrs. May's pledge, the Speaker of the House of Commons John Bercow reiterated his statement from last week that the government cannot put the Prime Minister's draft deal before MPs for a third vote, without "substantial changes" first.

As a result, the UK's Brexit negotiations remain up-in-the-air. This has affected the value of sterling versus the euro in the last 24 hours, and looks likely to continue to do so, looking ahead.

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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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