The pound to euro interbank exchange rate stands at 1.1586 today at the time of writing. This is just under 1 cent below sterling’s recent 24-week high against the euro, its strongest since May 8th.
One reason behind this sterling strength is the expectation that the European Union (EU) looks set to grant the UK a three month Brexit extension, which could be announced today.
Looking ahead, sterling’s value versus the euro could be affected, depending on whether the UK uses the extra time to call a general election or not.
Pound euro exchange rate forecast: EU grant three month extension
This has relieved the financial markets, because there’d been some concern last week that France’s President, Emmanuel Macron, would push the EU to grant a two week extension, to mid-November.
However, over the weekend, it appears that European Council President Donald Tusk has convinced Mr. Macron to extend the Brexit limit, up to January 31st, which the EU has confirmed today.
This has supported sterling, in part because it reduces the risk of an accidental ‘No Deal’ Brexit, this Thursday 31st October.
UK to decide whether to hold general election
Looking ahead; the UK will now has to decide how to use this time.
It’s thought that Prime Minister Boris Johnson will try to call a general election in Parliament, this Monday 28th.
However, under the UK’s Fixed Terms Parliament Act, there can only be an election every five years, unless 2/3rds of MPs decide otherwise. So Mr. Johnson will need the support of the opposition Labour Party, to successfully call an early election.
So far, Labour leader Jeremy Corbyn has said that he wants to see a ‘No Deal’ taken off the table, before supporting an election. This decision has the potential to impact sterling rates in the short term.
Get in touch with your account manager on 01494 725 353 to discuss these events further and find out how GBP/EUR rates could be impacted in the coming weeks.