If you’re looking for a Euro forecast, it may interest you to know that the Pound is coming under increased selling pressure, as economists expect a sharp economic slowdown in quarter two.
Following a buoyant first quarter, the Bank of England is expecting the UK economy to flatline, and some economists expect the UK economy to contract. The UK economy has not contracted for seven years, but many fear that we’re on the cusp of a recession. This is with the manufacturing and construction sectors slowing, and the services sector struggling to keep its head above water.
Big investment decisions are not being made by firms as Brexit uncertainty continues. With little chance of a breakthrough, the outlook for the UK remains bleak. Odds of a no-deal Brexit are increasing, adding further pressure to the UK currency. The CBI (Confederation of British Industry) has warned that businesses are not committing to large capital outlays and, instead, are looking at areas where costs can be cut.
Pound to Euro rate approaching six-month lows
The GBP/EUR interbank market remains in the 1.11s. This is very close to the six-month low that we saw recently and more than 5% lower than the high we saw in early May, two months ago. A purchase of €200,000 would now cost you £9,000 more than in early May.
Whilst no side wants a no-deal Brexit, markets now fear that this could happen by accident. It is difficult to see how progress can be made, with the European Union showing little willingness to renegotiate Theresa May’s deal, or more specifically the Irish backstop, and the UK in complete disarray about what it wants.
Boris Johnson looks set to take control of the Tory Party in the next few weeks. With MPs subsequently on holiday for much of the summer, it seems little will happen before September. This gives the UK government less than two months before the new Brexit deadline. In the meantime, economic data and confidence are likely to remain weak. This will make it difficult for Sterling to break away from this low.
For more information on how your Euro purchase or sale may be affected, please feel free to contact me.