Pound to Euro Exchange Rate Held back by the Key 1.1250 Pivot

The pound experienced a positive swing this week in response to Monday’s announcement of successful trials of a COVID-19 vaccine. The pound to euro exchange rate hit a two month high of 1.1285 during yesterday’s trading but failed to maintain these gains throughout the day and once again closed below the key resistance level of 1.1250.

This resistance is key as these levels act like ‘ceilings’ keeping prices from rising higher and are often the level where rising prices stop, change direction or indeed begin to fall. GBPEUR levels need to breach this marker for any moves higher for the pound.

Unexpected Economic Growth Not Enough to Support the Pound

Pound to euro exchange rates fell back below 1.12 this morning despite the announcement of record growth in the UK economy of 15.5% for July to September. This figure showed growth in all sectors of the economy – services, manufacturing, and construction as the economy was reopened following the first coronavirus lockdown.

Unfortunately, was not a strong enough figure to make up losses from both Q1 & Q2 for the UK. Having dropped a jaw-dropping 19.8% in Q2 following a 2.5% in the first quarter of the year. This leaves the UK economy still almost 7% smaller than the start of the year. Looking forward the last quarter is unlikely to read so positively as we have returned to lockdown in November. Rishi Sunak, Chancellor of the Exchequer suggested that this is still cause for ‘cautious optimism’ for the future performance of the UK economy although currency markets obviously were not convinced.

Pound to Euro Forecast Still Dependent on Brexit Negotiation

It is only seven weeks from today that the UK will leave the European Union, and both sides are fast running out of time to form a trade deal. Having surpassed Boris Johnson’s deadline for negotiations to conclude one way or the other (deal or no deal) on 15th October it is now believed that the EU council meeting on 19th November is a significant date in the diary for Brexit. This will allow enough time for any necessary legal changes to be ratified, just.

With rumours this week that Michel Barnier arrived in London with a league of tariffs which could be imposed on UK exports to Europe, totalling up to £960million annually, negotiations at this stage are far from friendly. Irish Taioseach Michael Martin warned overnight that now is the time for the UK to “knuckle down” to get a trade deal with the EU. Highlighting the economic shock that COVID-19 has had on the global economy he points out that a second shock on departure date needs to be avoided.

Pound to euro exchange rates remain cautious as we head towards December 31st with the whole market waiting with baited breath for any indication on whether an agreement on a trade deal can be met. Get in touch using the form below to find out more about the impact of the above factors on your upcoming currency exchange.

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