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The pound to euro exchange rate saw big improvements on Tuesday as the second week of October got underway. GBP traded at a two-month high against the euro as sterling benefitted from positivity around Brexit. Also aiding the pound’s movements was the good news regarding a successful coronavirus vaccine.
Looking ahead at today, little new data is out.
Experts predict it will therefore be a day of “headline-watching,” with Brexit remaining the centre of attention.
The pound is currently trading at 1.1226 against the euro, according to Bloomberg at the time of writing.
Michael Brown, currency expert at international payments and foreign exchange firm Caxton FX, spoke to Express.co.uk regarding the latest exchange rate figures this morning.
“Sterling briefly traded at two-month highs against the common currency yesterday,” said Brown.
“It benefitted from a more positive feeling around the post-Brexit trade talks, inflows into in-demand UK equities, and belief that Pfizer’s vaccine candidate may be of more benefit to the UK – having it delivered first – compared to global peers.
“Today, given the somewhat barren data docket, it will be another day of headline-watching, with Brexit the main focus.”
George Vessey, currency strategist at Western Union, shared the latest on Brexit developments.
“Brexit negotiations continue this week ahead of the mid-November deadline to secure a trade agreement,” he said.
“The usual sticking points are yet to be overcome, which is keeping the risk of an ‘Australia-style’ Brexit on the table.
“UK PM Boris Johnson once again stated on Monday that Britain was well-equipped to exit the EU on Australia-style terms – a euphemism for a no-trade deal scenario, which is expected to severely disrupt trade in an already damaged economic environment.
“GBP/USD could fall back towards and under $1.20 in such a scenario and GBP/EUR could fall towards parity.”
Vessey continued: “Meanwhile, amidst a Joe Biden presidency, the UK may soften its stance on Brexit given Mr Biden’s views on the matter, especially the Internal Markets Bill.
“The government suffered a heavy defeat in the House of Lords on this bill though, which might subsequently increase the chance of a UK-EU trade deal.
“If a deal is agreed, GBP/USD could stretch towards $1.35 and GBP/EUR towards €1.15, although a narrow trade deal is forecast so could limit sterling upside.”
Yesterday’s labour market report also impacted sterling.
“The British Pound dropped and popped following a mixed labour market report,” explained Vessey.
“A record number of redundancies were made in the third quarter of the year and the jobless rate jumped to 4.8 percent from 4.5 percent, though wages increased by more than expected.
“A record level of 341,000 redundancies over the past few months highlights the fact that the government cannot support everyone in the labour market with its job retention schemes.
“Last week, finance minister Rishi Sunak extended the expensive furlough scheme until the end of March 2021, which underscores the scale of the challenge the pandemic is having.”
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