The euro has taken a tumble against Sterling and USD at the beginning of this week, and its recent rally against both currencies looks to be hitting a stumbling block. This could be down to a more positive sentiment around the chances of a UK-EU Brexit deal being agreed by October, coupled with a correction in the euro’s recent rally against USD over the past month. During yesterday’s trading we saw EUR to GBP and EUR to USD rates fall by almost 0.8% and 0.4% respectively.
Brexit Deal Optimism Boosts GBP Value
Throughout periods of July the single currency made significant gains against GBP as reports emerged of EU and UK Brexit negotiators at logger heads over UK fisheries and ensuring a level playing field for the future. As such, it was looking likely at this point that a deal could be agreed by October, with Michel Barnier being quoted as saying a deal looked “unlikely at this point” and that the UK had not shown any determination to “break the deadlock” on fair competition and fisheries.
Over recent years, Brexit has been one of the key drivers for EURGBP exchange rates, and whenever there are fears that a Brexit agreement will not be met, and a No-deal looks to be on the horizon, the Pound continues to suffer. As such, it seems as though until there can be clarity on whether a deal can be reach, that EURGBP will be driven by any updates on this topic.
In the past week or so however, there does seem to be more of a positive tone and sources close to Michel Barnier have said that behind the scenes, Barnier is confident that a deal can be reached. Brexit negotiations are scheduled to continue towards the middle of August and reports from these talks will be key to the direction of EURGBP rates. If you have an upcoming euro currency requirement it is worth contacting us to find out how these talks could affect your currency transfer and understand the various contracts that we can make available to suit your needs.
How Will this Week’s BoE Meeting Affect GBPEUR?
A key Driver for GBP to EUR exchange rates outside of Brexit this week is likely to be the Bank of England’s Monetary Policy meeting on Thursday. Analysts are expecting the bank will keep interest rates on hold at their record lows of 0.1%, but that there could be less QE announced compared to what was originally planned in June. As such this could help the Pound continue to find support against the euro this week. There have also been questions in the past as to whether interest rates will be cut to below zero in the future, something which governor Andrew Bailey is sure to be questioned on during his press conference. The largest swings in currency value are likely to come as a result of any comments during the press conference, so be sure to keep an eye on developments as they unfold.
Recent EUR Rally Against USD Stalling
USD has been under significant pressure against EUR in recent weeks due to a spike in Coronavirus infections across many states and the uncertainty this has created around the strength of the economy. As such there has been a EUR rally, but this is showing signs of stalling. This could be a result of infection rates now rising in other areas of the globe such as Australia and therefore investors may look to the safe haven shores of USD. Over the weekend there have been calls from some Federal Reserve officials to bring in a lockdown over the next six weeks to help control the spread of the virus and boost the economy long-term and this is likely to add further volatility for USD rates.
Looking ahead this week and there are several data releases from the US which are likely to create swings in EURUSD trading values. Jobless claims numbers in the US on Thursday are likely to cause volatility as they have done in recent weeks. These numbers have been hard to predict in the current climate and have often seen big shifts in recent weeks due to the opening and closing of areas of the economy. Friday’s Nonfarm payroll numbers are also likely to create volatility and are notoriously difficult to predict in advance. As such, any clients with a EURUSD transaction should keep in close contact with us to find out how this data affects your currency needs.