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Pound to euro exchange rate reaches best levels since June

The UK economy and the Eurozone may each be facing economic challenges today, but the currency pairing has nonetheless reached their best position in three months.

At the time of writing, the British pound to euro (GBP/EUR) exchange rate stands at EUR 1.13, slightly up from yesterday’s rate of EUR 1.12.

There appears to be a mixed forecast for pound Sterling (GBP) sentiment this week, with numerous developments likely to impact investor outlook even further.

British Pound v Euro

British Pound v Euro

Pound to euro (GBP/EUR) outlook

As fears of a hard Brexit grow by the day, today’s small but welcome gain in the British pound to euro (GBP/EUR) exchange rate may be short-lived.

Yesterday, top Brexit negotiators David Frost and Michael Barnier held emergency discussions to find a breakthrough to securing a mutually beneficial Brexit trade deal.

Despite honourable intentions, it appears that little progress was made, contributing to fears that the UK will be faced with a no-deal Brexit.

The UK government has accused the European Union of making Brexit discussions ‘unnecessarily difficult’ following France’s claims that the UK has been ‘deliberately stalling’ negotiations.

A spokesperson for Prime Minister, Boris Johnson, confirmed that a potential deal could still be possible by the end of the year but would now be very difficult to achieve.

The uncertainty of Brexit places the pound Sterling (GBP) in a vulnerable position, with the prospect of a breakthrough becoming increasingly unlikely.

Equally, the value of the euro (EUR) is under pressure, as Gross Domestic Product (GDP) growth data revealed an unexpected fall in Germany’s retail sales growth for July. This has prompted fears that the Eurozone’s economic recovery is grinding to a halt.

George Vessey, UK Currency Strategist at Western Union Business Solutions, believes the Eurozone’s financial concerns may pressure the European Central Bank (ECB) to provide further financial stimulus to help generate price growth.

Tomorrow will also see the release of final UK and Eurozone Purchasing Managers Index (PMI) figures for the services sector. Investors will be closely monitoring the data and if the results are better or worst than forecast, the British pound to euro (GBP/EUR) exchange rate will fluctuate. Britain’s services sector accounts for a significant portion of the nation’s economic activity. As a result, tomorrow’s numbers have the potential to cause a threat to pound Sterling (GBP) if the outcome disappoints investors.

US Dollar and Sterling- banknotes and coin. GBP-USD concept

Dip in the British pound to US dollar (GBP/USD) exchange rate

Despite reaching a 2020 high yesterday, progress in the British pound to US dollar (GBP/USD) exchange rate has begun to dwindle, with the exchange rate currently at USD 1.33.

Yesterday’s US manufacturing data providing a much-needed boost for the US dollar (USD). It is hoped that today’s release of the ADP Employment Change report for August will also reveal promising figures. It is projected that the US could see an increase of around 950,000 workers added to payroll for August which could see the US dollar (USD) edge higher against the British pound (GBP), as the US economic outlook improves.

A further dovish commentary today from Bank of England (BoE) Governor, Andrew Bailey, also held back any advance of the British pound to US dollar (GBP/USD) exchange rate. Bailey announced that the UK’s uncertain economic outlook is likely to adversely impact financial growth within the UK. The Governor then confirmed that the Bank of England’s Monetary Policy Committee would shift its focus towards Brexit during their meeting in November.

South African Rand currency

British pound (GBP) edges lower against South African rand (ZAR)

The South African rand (ZAR) has rallied against the British pound (GBP) this week following the release of domestic Consumer Price Inflation (CPI) figures, which revealed a sharp jump in inflation for July.

The British pound to South African rand (GBP/ZAR) exchange rate is currently trading at ZAR 22.40, a sharp decline compared to the start of the week when it was trading at ZAR 22.65.

As South Africa’s economic outlook continues to brighten, it is hoped that the South African Reserve Bank (SARB) will look to avoid further interest rate cuts this year.

The British pound to South African rand (GBP/ZAR) exchange rate will undoubtedly be driven by the fate of UK redundancies this month as well as any confirmation of rising coronavirus cases.

British pound (GBP) falls against the Canadian dollar (CAD)

After a week of rallying, the British pound (GBP) has finally fallen against the Canadian dollar (CAD). Currently, the British pound to Canadian dollar (GBP/CAD) exchange rate is trading at CAD 1.74.

The Loonie has managed to recover losses against the British pound (GBP) following a rise in oil prices and this has enabled the currency to capitalise on the recent weakness of the pound (GBP).

Any continuation in the progress of the Canadian dollar (CAD) will depend on Canada’s August job market report due to be released on Friday. Better than expected figures could see a further strengthening of the Canadian dollar (CAD) as Canada’s economic outlook improves.

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