The pound to euro exchange rate suffered an unexpected slump yesterday despite a lack of major political or economic headlines. Risk surrounding sterling remains apparent for traders as the fallout of the coronavirus pandemic affects countries around the world.
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The pound is currently trading at a rate of 1.1049 against the euro according to Bloomberg at the time of writing.
Michael Brown, currency expert at Caxton FX, shared his exclusive insight into the exchange rate with Express.co.uk.
“Sterling slid to its first one-day loss in four against the euro on Monday, in somewhat surprising fashion given the lack of any impactful headlines, and the broad firming of risk appetite which should’ve put a bid into sterling,” he explained.
“Nonetheless, perhaps political jitters are outweighing these factors.
“Looking ahead, a quiet data calendar awaits, ensuring that focus will remain on the latest coronavirus headlines; while the market is also likely to look ahead to tomorrow’s economic update statement from Chancellor Rishi Sunak.”
Chancellor Rishi Sunak is due to address politicians and the wider public tomorrow with regards to an update on the current economic climate as the UK slowly emerges from COVID-19 lockdown.
George Vessey, currency strategist at Western Union Business Solutions shared his insight into the potential news the economic update could bring with it.
“British Finance Minister Rishi Sunak is expected to give a financial statement on Wednesday ahead of the formal Budget update later this year,” he said.
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“Information on the current job retention scheme is likely to be unveiled along with changes to some tax measures in an effort to steer the UK economy successfully out of the pandemic-induced slump.
“According to a report by The Times yesterday, Mr Sunak is expected to announce plans to raise the property tax threshold to as high as £500,000 from £125,000 to exempt most homebuyers from paying any stamp duty.
“Furthermore, the Chancellor is likely to include a temporary VAT cut for the hospitality sector, which is expected to help protect 2.4million jobs in the sector.”
Saturday saw the reopening of many pubs and restaurants across the UK, as well as some barbers and hair salons.
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On Friday, Prime Minister Boris Johnson also announced travel corridors allowing Britons to journey quarantine-free between 59 countries.
However, concerns around a potential second wave of the virus and its subsequent impact on the economy, means traders are proceeding with caution.
“The UK’s pubs and restaurants opened up to consumers again on Saturday but with social distancing measures in place, the turnover of customers and revenue was restricted,” continued Mr Vessey.
“The lockdown measures in the UK caused the economy to contract 20 percent in April and although the reopening of sectors is positive, it also heightens the risk of a second wave of infections and lockdowns being reinstated in the future.”
Recent months have seen the pound fluctuating dramatically.
Mr Vessey added: “The pound is up nearly one percent month-to-date against the US Dollar, though gains against the Euro are more muted at around 0.2 percent.
“GBP/USD is toying with the $1.25 handle today whilst GBP/EUR is slipping away from the €1.11 mark as investors flee from the USD.”
With travel to some countries back on the cards, the uncertain rates could cause concern for holidaymakers hoping to switch their travel money.
The Post Office Travel Money is currently offering a rate of €1.0667 for amounts of £400 and over, and €1.0877 for amounts totalling more than £1,000.
Though many travel money services have reopened for business, financial journalist Martin Lewis suggests using a prepaid travel money card instead of hard cash.
“If you want a card that you don’t need to be credit-scored on, you’d probably be better off with the Starling Debit Card which is fee-free and if you don’t get the overdraft it does a light credit search on you rather than the full credit check and is easier to get,” he said yesterday.
“It pretty much gives you just a little bit over the spot rate when you spend abroad.”
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