The euro to pound exchange rate regained most of its lost ground yesterday afternoon as prices fell to more than a 2-week low. Part of the move resulted from the positive sentiment of the two chief Brexit negotiators, David Frost and Michel Barnier, who indicated that the move towards a trade deal had become somewhat more likely in yesterday's talks. Michael Gove said the negotiations are in a "healthy stage" which could lead to further volatility in the euro to destroy exchange rates.
During the four years of the Brexit talks, it appeared that many concessions in the discussions were found very close to the deadlines before they were previously extended. With no way to move the goalposts until 2021 this time around, an EU approach to adopt or leave it could potentially result in a move in the single currency. In the past, it had been more beneficial for the pound to get closer to an agreement than it was for the euro, while the mention of no deals or extensions had been detrimental to the pound.
More talks are due to take place today and if today is like yesterday we could see some more movement for EUR / GBP rates. With an interbank rate of 0.907 today and a movement range of 1 cent yesterday, there is certainly potential for good trading opportunities depending on how interest rates move today.
The euro to US dollar exchange rate achieved better results yesterday as the currency pair gained half a cent in yesterday's trading session to currently 1.168 at the time of writing. The first round of the US election campaign is taking place today, with Trump and Biden competing against each other to discredit each other and potentially cause some negativity for the US dollar. In this case, the levels could be closer to the 1.189 and even 1.19 levels that we had recently seen over an extended period of time.
New mask restrictions in Dutch cities
However, there have been some damaging news events for the euro area recently when Holland announced that its three largest cities – Amsterdam, Rotterdam and The Hague – would impose mandatory restrictions on the wearing of masks, with bars and restaurants closing until 10 p.m. curfew have to. It comes as the nation sees 3,000 new cases of COVID-19 every day, and it may well continue. Should more measures come into effect that are more invasive to European economies, the currency could weaken and the euro could fall against some of its key counterparts.
The Netherlands isn't the only country struggling with new coronavirus administrations in breach of 10,000 in other EU member states like France in the past few days, which could give cause for concern for a possible second lockdown like the UK's Circuit considers breaker.
In Germany, the harmonized consumer price index will remain unchanged at -0.1% today. This will provide an insight into price stability and reflect how unpredictable the German economy is currently in these uncertain times. The unchanged expected retail sales of 4.2% are accompanied by the speech of the President of the European Central Bank, Christine Lagarde, who, depending on the economic prospects of the bloc, could cause some currency movement.
Most of the data will be released at the end of the week, however, as the EU leaders will be carried over to Friday on Thursday and the euro zone consumer price index will also be received at the same time. This is expected to increase marginally by only 0.1% from 0.4% to 0.5%, so this cannot be expected to give the euro a significant boost.
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