The EURGBP rate has started the day of to a flyer as the rate touches just below the 0.892 level. This has mainly come from some business optimism following the release of the latest Purchasing Managers Index data which beat high expectations. The reading was one of the strongest ever for services which is the UK’s main driver and suggests the economic recovery could be about to start. Furthermore, this news was coupled with the opposite in Europe where whilst there was a positive reading it was far below what analysts had expected to see.
The UK’s recovery will be a main igniter for the pound and the speed in which the economy can get back up to capacity will be key. Do far the road to recovery has been relatively slow however over the course of the next few months that might look to change. If the UK can start to rally and data is positive in the coming months there could well be a positive trend for the pound.
No Progress From Brexit
This week we saw the UK and EU back around the negotiating table following a two week break at the start of the year. There has now been comments from both UK Head Negotiator David Frost and his counterpart Michel Barnier. Both have talked of a lack of progress with impasses still remaining between the two sides. This is hardly surprising with both sides still firmly stuck in the ground on key points such as fisheries and state aid.
The EU are infamous for doing all their negotiating at the last minute and there is little progress made until the crunch time comes. In this case we’re still a few weeks from that point as the deadline is not until the end of the year. However in order for the deal to be ratified in time and accepted by the EU there is a expectation that the talks will need to conclude by the middle of September.
It’s interesting that despite the major uncertainty the UK Purchasing Manager’s Index date was so strong however that was not replicated in the EU. The UK attitude towards Brexit may be changing as there is a argument Coronavirus has caused far more disruption than a split for Europe was going to cause. As a mainly importing economy some of the goods from Europe may not be shipped as freely as previously and with general virus precautions, we may start to see a more inward looking economy in the future.
Secondly as the UK has a very limited number of manufacturers and the majority of the UK Gross Domestic Product (GDP) data is from office roles it does put the UK in a strong position for working from home. Some economies that manufacture goods as a large proportion of GDP will have considerably larger amount of disruption compared to a country like the UK where people can work from home, funding the economy.
I believe that this could start to get reflected in the strength of the pound over the coming months. Should the UK agree a deal with the EU and the uncertainty is lifted that could be a trigger for Sterling to really jump. At the start of the year the EURGBP rate was down at 0.833 following Boris Johnson’s landslide election win and the markets were confident of a deal at that point. Whilst the rate is currently at 0.893 there is a large amount of room for movement based on previous conditions.
If you’re looking at selling euro’s there is always a chance that Brexit talks fail and the rate moves even further in your favour. However with vested interest for both sides to agree a deal of some sort, the cliff edge of a no deal Brexit does look unlikely. However there is no way of predicting the future and the uncertainty surrounding this outcome will continue to move the EURGBP rate. Get in touch using the form below to discuss thesefactors in more fetails and how they could impact your upcoming currency exchange. I’ll be happy go get in touch personally and discuss your enquiry.