The pound to euro interbank exchange rate stands at 1.1062 today at the time of writing. This is just -0.18% below sterling’s recent high, reached on August 27th, of 1.1082.
By comparison, yesterday sterling was as low as 1.0936 against the common currency. So in the last day, the pound euro interbank exchange rate has risen by over one cent, or by +1.15%.
This could be of interest to you, if you’re a Briton buying property abroad or you’re emigrating to Spain or France, or you’re a UK business owner making international payments to the Eurozone.
This is because, when you exchange pounds to euros, you could now get a higher euro total in your Eurozone bank account, compared to if you’d transferred money abroad yesterday.
In turn, this might make it more affordable for you to buy Spanish or French real estate, or retire to the Mediterranean, or to cut your currency for your business costs in euro terms.
To stay up-to-date with the pound to euro interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, scroll to the Latest Market Rates Widget to see this week’s interbank rates.
Also, to check what’s influencing the value of sterling versus the common currency, visit our GBP to EUR Exchange Rate Updates page. Here, click on the latest article to read the recent news.
A first reason why the sterling vs euro interbank exchange rate has strengthened overnight is because MPs in Parliament yesterday voted to debate preventing a ‘No Deal’ Brexit.
However, looking to the foreseeable future, sterling’s value against the euro could be affected, because Prime Minister Boris Johnson has said that he’ll now seek to call a general election.
In addition, looking ahead, the value of the GBP (Great British pound) versus the EUR (euro) might weaken, because the UK’s construction sector shrank further in August, says new trusted data.
Let’s take a closer look at these reasons why the pound to euro interbank exchange rate has gained in value overnight. You might find this helpful, for when you transfer money abroad.
Pound Euro Exchange Rate Gains, as MPs Vote to Debate Blocking ‘No Deal’ Brexit
As I mention, a first reason why the sterling vs euro interbank exchange rate has strengthened overnight is because, yesterday, MPs in Parliament voted to take control of the legislative agenda from the government, and debate preventing a ‘No Deal’ Brexit.
If MPs vote to block a ‘No Deal’ today, this increases the probability that the UK will exit the European Union with an agreement.
Yesterday, Parliament returned from its Summer recess, and MPs immediately voted to take control of the legislative agenda from Prime Minister (PM) Boris Johnson’s government, reports the Independent.ie newspaper.
This is because the PM has announced that he’ll close Parliament from September 12th to October 14th, ostensibly to prepare his government’s objectives, yet thereby limiting MPs’ time to debate Brexit.
As a result, yesterday MPs voted to take over Parliament’s agenda, to vote whether to legislate against a ‘No Deal’ Brexit, before Parliament closes again next week.
Members of Parliament voted by a majority of 321 to 301 to wrest control of the agenda from the government, including 21 rebel Conservative MPs. So MPs will now debate whether to block a ‘No Deal’ Brexit today.
It's notable that, what with 21 rebel Tory MPs voting against the government yesterday, the PM has now lost his Parliamentary majority.
This is because Mr. Johnson had a majority of just one MP before yesterday’s vote, and he’d promised to expel Tory MPs who voted with the opposition. Mr. Johnson has now done this, including senior MPs like former Chancellor Philip Hammond.
Mr. Johnson is the first Prime Minister to lose his first vote in the House of Commons since Lord Rosebery in 1894. The PM is now the leader of a minority government.
In addition, the government’s loss indicates that a majority of MPs favour the UK exiting the EU with a deal, rather than the ‘No Deal’ strategy favoured by the PM, plus Brexiteers like Jacob Rees-Mogg.
It's thought that, now that MPs have voted to take control of Parliament’s agenda, they’re likely to vote in favour of preventing a ‘No Deal’ Brexit.
According to The Guardian newspaper, the most likely course is that MPs will vote to oblige the Prime Minister to request a second extension to Article 50, the UK’s Brexit negotiating timetable, up to January 31st. This is an extra three months.
This has strengthened the pound, because the financial markets believe that, if the UK exits the EU with a deal, we’ll retain closer economic and political ties to Europe in future.
The EU is the UK’s closest trade partner, and we send nearly half our exports to the continent. So if there are fewer tariffs or less bureaucracy to trade with Europe after Brexit, this will favour the UK’s economic growth.
Sterling Could Be Affected, as PM Johnson Seeks to Call General Election
However, looking to the foreseeable future, the sterling vs euro interbank exchange rate could be influenced, because following Prime Minister Boris Johnson’s loss yesterday, he’s announced that he’ll seek to call a general election.
This may affect the value of the pound, because if the UK goes to the polls, this would further complicate the UK’s political and Brexit outlook.
As I mention, yesterday 21 Conservative MPs voted against the government in favour of debating blocking a ‘No Deal’ Brexit, and Mr. Johnson has expelled these MPs from the Tory Party.
Following his loss, the PM said that “The consequences of this vote tonight means that Parliament is on the brink of wrecking any deal that we might be able to get in Brussels.”
For the PM, his loss yesterday indicates that Parliament doesn’t have confidence in his Brexit strategy, including among his Conservative Party.
Moreover, now that Mr. Johnson leads a minority government, he’ll need to call a general election, try and regain a majority in the House of Commons, to effectively govern. So Mr. Johnson has announced that he’ll seek to go the polls, according to Euronews.
According to UK law, under the Fixed Terms Parliament Act, the UK only holds a general election every five years.
However, an election can be held sooner, if 2/3rds of MPs vote in favour of going to the polls. So if Mr. Johnson calls for a general election this week as looks likely, he’ll need support from at least some opposition MPs for this to pass, likely among the Labour Party.
Labour leader Jeremy Corbyn has announced that he’ll only vote for a general election, once the law blocking a ‘No Deal’ Brexit has passed.
Speaking yesterday, Mr. Corbyn said that: “We will legislate against his disastrous 'no deal' plans. We’ll support a vote to call a general election, so the people can decide our country’s future, once the bill to stop no-deal is law."
This is to say, Mr. Johnson’s call to hold a general election will only succeed, once the opposition has prevented a ‘No Deal’ Brexit. As I mention, it looks likely that opposition MPs will legislate against a ‘No Deal’, perhaps as soon as today.
However, a general election will increase the UK’s uncertain political outlook, and add to the Brexit complexity, thereby influencing the pound.
Pound Might Be Influenced, as UK Construction Sector Contracts Further in August
In addition, looking ahead, another factor that may influence the value of the pound on the interbank market is the fact that the UK’s construction sector contracted again in August, according to trusted statistics yesterday.
This could affect sterling in the foreseeable future, because this provides further evidence that the UK economy is now struggling, owing to the Brexit uncertainty.
Respected economics watchdog IHS Markit revealed yesterday that the UK’s construction PMI (Purchasing Managers’ Index) fell to 45.0 in August.
This was below the financial markets’ forecasts for 45.9, as well as July’s figure of 45.3. Also, it’s UK construction’s fourth consecutive month below the 50.0 figure that separates economic growth from contraction.
In particular, new orders to UK construction companies fell for the fifth consecutive month in August, and at the fastest pace since March 2009, said IHS Markit yesterday.
To explain, the new orders sub-index dropped to 40.0 last month, from 44.6 in July. Meanwhile, optimism among UK construction firms declined to its lowest level since December 2008, close to 11 years ago.
According to IHS Markit, UK construction activity eased further in August, in particular because of the Brexit uncertainty. British property developers delayed decision making, while clients cut their budgets, especially in the commercial sector, such as shops and offices.
It’s feared that further falls in orders in coming months could drive some construction firms out of business.
Duncan Brock, a spokesman for the Chartered Institute of Procurement and Supply (Cips), said about these data that: “there is little room for the sector to improve in the last quarter of the year. It’s likely September’s data will be even more discouraging.”
This could affect the value of the pound, because this contributes to recent data that the Brexit uncertainty is slowing the economy.
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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.