Pound to Euro Falls Sharply After Rally

The pound to euro exchange rate fell sharply yesterday having rallied higher throughout the week with rates hitting a low today of 1.1106 for the pound to euro currency pairing. Rates have also fallen for GBP vs USD with levels hitting a low of 1.3109 down from 1.3291 on Wednesday.

The pound found additional support this week after the announcement on Monday of a new vaccine that could prevent more than 90% of people from getting Covid-19. This vaccine being tested by pharmaceutical companies Pfizer and BioNTech is one of 11 vaccines currently in the final stages of testing. The UK has signed up for 20 million vaccines at this stage.

Health secretary Matt Hancock has suggested that he expects the vaccine to be rolled out in the first part of next year. Deutsche Bank has forecast that some countries will benefit more than others and that the UK economy could be one of the biggest beneficiaries. This bodes well for sterling exchange rates going forward and has no doubt contributed to the recent rally in the price of GBP. However more testing will be needed.

Nonetheless the pound saw a wobble yesterday at a time when there are so many differing factors at play. After Joe Biden won the US election last Saturday the markets have been trying to establish how much of an impact, if any, that win will have on the state of play in the Brexit trade negotiations. There has been a suggestion that Biden may look to France as a first point of call to improve relations with the EU. Biden and his Democrat team have been vocal that they consider Brexit to have been a mistake for UK and US interests with the EU but it still remains to be seen whether his election result will have any final bearing on what that future UK EU trading relationship looks like. It turns out that Joe Biden’s first point of call was in fact to UK Prime Minister Boris Johnson. It will be interesting to see whether this has any influence on the state of Brexit negotiations. Yesterday the EU’s chief negotiator Michel Barnier was photographed in Regent’s Park in London which was tweeted with the strapline “”Short break from intense EU-UK negotiations in London,” adding: “Went looking for level playing fields…”

UK Chancellor Rishi Sunak also expressed optimism at the start of the week for a UK EU trade deal but also raised the important issue of how Britain will need to face difficult decisions on how to pay for the lockdown era after billions of pounds have been spent to prop up the economy.

Much of the UK media attention over the last 24 hours has been focused on the expected departure of Boris Johnson; s senior adviser Dominic Cummings. Mr Cummings was instrumental in the vote leave campaign as he has been in the decision-making process in government ever since. The news follows the departure of Lee Cain who was Boris Johnson’s Director of Communications. What this ultimately means for the final state of play for Brexit also remains unknown. It is not yet clear whether this announcement will have any bearing on whether there is a deal or no deal outcome. Those with pending requirements to either buy or sell Euros should pay close attention to all the latest Brexit related developments as there could be significant shift on any major announcements.

In a sign of how a deal may actually be further away than some think the Sunday Times reported last weekend that sources close to the Brexit negotiations had said “We still need more realism from the EU. They can’t expect us to agree to a treaty under which we can’t move away from EU norms in important areas.”

Both sides have agreed that an agreement must be reached by Monday November 16th to allow sufficient time for the legal text to be translated into all the different European languages and ratified. Any developments either positive or negative are likely to significantly change the pound to Euro forecast. With only three days to go until Mondays this is a very important deadline fast approaching. It has also been reported though that talks could potentially be extended into December which could also impact on the outlook for the pound to euro.

The next UK data of note is Consumer Price Index inflation numbers released on Wednesday. UK house price numbers from Rightmove are also released which could have some bearing on the state of the UK property market at this juncture. to discuss the potential impact we could see from these data releases on your upcoming currency exchange and the tools available to limit your exposure to the changing currency markets, get in touch using the form below.

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