The Pound has dropped off by just under a cent against the Euro

21 October, 2020

This week has been a fairly quiet one on the currency markets, despite a busy week on both the pandemic and Brexit fronts.

The Pound has dropped off by just under a cent against the Euro as a result of additional lockdown measures being introduced in the UK to combat Covid 19, coupled with some mixed UK economic data and the last few days’ worth of Brexit news.

With the government enforcing a move to Tier 3 restrictions on Manchester, following a failure in negotiations, and other areas of the north soon to follow, it is surely only a matter of time before additional measures are introduced across more of the country, and with the anticipated economic impact of that, the Pound will almost certainly struggle as a result.

On the Brexit front, there is a current impasse between the negotiating teams, with the UK insisting that negotiations won’t proceed until the EU changes its firm stance agreed at the EU council last week. The EU said that the UK needed to change its approach and current stance, and now the UK has said essentially the same thing in response. No Deal mentions have increased again with the PM saying preparations for a 1st of Jan 2021 No Deal should intensify. The Pound took a little bit of a hit as a result – not as much as you might expect, probably due to expectations that much of the above is just “negotiating tactics”, rather than actual closing down of those negotiations. But it cannot be underestimated how negative a No Deal outcome would be for Sterling.

The other noticeable move on the markets was a weakening of the US Dollar. Policy makers in the US are in talks over an additional fiscal stimulus package, which while potentially good news for the US economy, has caused some uncertainty and thus knocked the US Dollar’s safe haven status a little, and as a result the Dollar has dropped off – around half a cent against both the Pound and the Euro.

So, lots going on, but not necessarily the impact on the currency markets you might expect. However, this is probably just a case of “yet”. Once things become clearer on pandemic lockdowns and Brexit negotiations, we can expect the currencies to move more clearly, and the Pound does sadly remain the most vulnerable, with it being a victim of the UK’s pandemic response and Brexit simultaneously. So, if you have an upcoming currency requirement and Sterling in hand, it is probably a good idea to consider booking in your exchange rate, before any further negativity comes to the fore. Why not consider a forward contract, which will allow you to secure a rate even if you do not need the currency for some time.