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Sterling Vs Euro Near 26-Week High, Ahead of Key UK/EZ Data

Market CommentarySterling Vs Euro Near 26-Week High, Ahead of Key UK/EZ Data
Sterling Vs Euro Near 26-Week High, Ahead of Key UK/EZ Data
Pound Euro Exchange.

The sterling vs euro interbank exchange rate stands at 1.1616 today. This is just 0.28% below its highest in over 26 weeks, or since May 8th, reached last October 21st, at 1.1649.

By comparison, back on August 10th the pound was as weak as 1.0646 against the Eurozone’s common currency. So sterling has since risen versus the euro by almost 10 cents, or by 9.11%.

This may benefit you, because when you transfer money to Spain or France from the UK, you might get a higher euro total, compared to if you’d exchanged currencies in the last 26 weeks.

In turn, this might make it more affordable for you, if you’re buying property abroad on the Costa del Sol or in the Languedoc, or if you’re making regular payments to the Eurozone.

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 against the euro, go to our GBP to EUR Exchange Rate Updates page. Here, simply click on the most recent article for the latest news.

One factor that might affect the GBP to EUR interbank exchange rate this week is the key UK and Eurozone economic data due for release, including UK economic growth for over the Summer.

Another potential influence on the pound to euro interbank exchange rate is the ongoing uncertainty over who’ll win the UK’s general election on December 12th, and the shifting opinion polls.

A third element that could affect the value of sterling versus the common currency this week is Spain’s general election results, and US President Trump’s decision to impose EU tariffs or not.

Pound Euro Exchange Near 26-Week High, Ahead of Key UK Economic Data

As I mention, one factor that might affect the sterling vs euro interbank exchange rate is this week’s important UK economic releases.

These include the UK’s GDP (Gross Domestic Product) figures for Q3, between July and September, due for release this Monday 11th at 09.30 GMT, by the Office for National Statistics (ONS).

To begin with, it’s thought that the UK economy expanded by a healthy 0.4% over the Summer, ahead of this morning’s release. If so, this would be a marked improvement on Q2’s figures, from April to June, when UK GDP contracted by 0.2%.

What’s more, if the UK economy returned to growth in Q3, this would mean that the UK has avoided entering a technical recession, which could influence the value of sterling.

However, it’s worth adding that, even if the UK economy grew over the Summer, it’s thought this would be partly because of temporary factors, rather than a sustainable expansion.

In particular, it’s possible that UK manufacturers ramped up their stockpiling, ahead of the now-obsolete Brexit deadline of October 31st. So we’ll see if UK GDP returned to growth, and why, this morning.

Looking to the rest of this week, tomorrow the UK’s unemployment and wage growth statistics are released, for the three months to September, according to FX Street.

In recent years, the UK labour market has been a bright spot given the Brexit uncertainty, and UK unemployment is forecast to remain close to a 4-decade low of 3.8%. However, it’s nonetheless thought that UK employment fell by 90,000 over this period.

Meanwhile, the financial markets predict that UK wage growth excluding bonuses remained at 3.8% between July and September. If so, this would be close to the fastest pace since the 2008/9 financial crash, and well ahead of UK inflation of 1.7%.

This would tell us that UK wages are rising faster than prices, thereby lifting Britons’ living standards. These data are released this Tuesday 12th at 09.30 GMT.

Turning to this Wednesday 13th, UK inflation statistics for October are made available too. It’s predicted that British price pressures fell by 0.1% month-on-month, to 1.6%.

If so, this would be further below the Bank of England’s official target of 2.0%, and make it less likely that the UK central bank will hike interest rates in the near future. These statistics too might affect the pound.

Lastly, the UK’s retail sales figures for last month are released by the ONS, this Thursday 14th. It’s forecast that sales at the UK’s shops and online rose by 0.2% in October, following September’s 0.0% flatline growth.

UK retail sales contribute greatly to the country’s economic growth statistics, so this Thursday’s data also has the potential to influence sterling.

Sterling Vs Euro May Be Influenced by Spanish Elections, Trump’s EU Tariffs

Turning to the continent, the pound to euro interbank exchange rate may be affected by this week’s key Eurozone economic data. These includes tomorrow’s German ZEW survey of economic sentiment, and this Thursday’s Eurozone GDP figures.

Also, Spain’s general election results could affect the euro, as might US President Donald Trump’s decision to impose EU tariffs or not, revealed this Wednesday.

To start with Spain’s general election, yesterday Spaniards went to the ballot boxes for the fourth time in four years, to try and unblock a complex political situation.

In particular, President-in-Functions Pedro Sánchez hoped on Sunday that voters would grant his centre-left PSOE party an absolute majority in Congress, so that Mr. Sanchez could govern without the far-left Podemos party.

In the event however, Spain’s population voted very similarly to this April’s general election, in which case Mr. Sánchez will still need to form an alliance with Podemos’ leader Pablo Iglesias, according to Spain’s El País newspaper.

The key difference to this April’s vote is that the moderate-right Ciudadanos party has lost ground to the extreme-right Vox party. So this could complicate Spain’s political outlook, and affect the euro.

Meanwhile, the value of the common currency could also be influenced this week, by President Trump’s decision to impose tariffs on EU vehicle exports to the USA or not.

Arguably, the Eurozone and particularly Germany are already the biggest losers in the US/China trade war. So if Mr. Trump imposes automobile tariffs directly on the EU, it may further weaken the Eurozone economy.

However, it’s important to note that it looks unlikely that Mr. Trump will go ahead with the tariffs, when he decides this Wednesday.

This is because US Commerce Secretary Wilbur Ross said recently that tariffs look like they’re off-the-table, because he’s had “good conversations”. Moreover, EU tariffs could slow the US economy too. So this may affect the common currency.

In addition, this week’s main Eurozone economic data that might influence the euro includes tomorrow’s ZEW survey of German economic sentiment. German businesses’ mood is forecast to improve somewhat in November, to minus 17.9, from October’s minus 22.8.

However, this would signal that Germany’s companies remain pessimistic, in part owing to the America/China trade war.

Also, this Thursday 14th we’ll learn the Eurozone’s revised estimate for economic growth for Q3, from July to September. It’s predicted that Eurozone GDP held at 0.2% over the Summer.

This would signal middling economic growth, yet far from 2017’s comparatively roaring pace. A surprise above or below these forecasts has the potential to affect the sterling vs euro interbank rate.

GBP to EUR Rate Could Be Affected by UK Election Uncertainty, Opinion Polls

Elsewhere, it’s worth adding that the sterling vs euro interbank exchange rate could be influenced this week, by the ongoing uncertainty over the UK’s forthcoming general election on December 12th, and the shifting opinion polls about who may win.

In particular, it’s thought that if the polls sharply shift direction, then this could affect the value of the pound over the next five weeks.

To start with, the pound to euro interbank exchange rate remains near this 26-week high, because the financial markets think that there are low odds of a ‘No Deal’ Brexit.

After all, the main political parties, except Nigel Farage’s Brexit Party, are campaigning on the UK exiting the EU with a deal. So this has reassured the world’s money managers, and is helping to support sterling.

However, beyond this, it’s unclear who’ll win next month’s election, or which political party or parties might form the next UK government.

On the one hand, according to the latest opinion polls, Prime Minister Boris Johnson’s Conservatives still have a 10-point lead over the official opposition Labour Party, reports the BBC.

Traditionally, this would grant the winning party a majority of MPs in Parliament. However, the world’s money managers also think that there’s a distinct possibility of what’s called a ‘hung’ Parliament.

This is when no single party governs, and instead the winning party either governs in minority, like PM Johnson has been doing in recent months, or signs a formal coalition. This is to gain a majority of MPs, and so more effectively pass laws in the House of Commons.

The financial markets think that a ‘hung’ Parliament is possible, because the British voting public looks more likely than in recent elections to switch votes.

In so-called “swing seats”, where the current MP only won by a small number of votes at 2017’s election, people switching votes could be enough for another political party to win. This complicates the UK’s election outlook, affecting 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.

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