The pound advanced versus the euro on Monday. The pound euro exchange rate gained 0.4% hitting a high of €1.1668. The pair is quietly advancing in early trade on Tuesday.
Brexit remained the exclusive driver of the pound in the previous session. Sterling trended higher as investors considered that a no deal Brexit was almost completely off the table. At the same time, the governments’ desire to get Brexit done by 31st October is also a big challenge.
The House of Commons Speaker John Bercow denied Prime Minister Boris Johnson the opportunity to put his Brexit deal to Parliament in a meaningful vote on Monday. He insisted it was “same matter” meaning it cannot be put to the House of Commons for a second time.
Boris Johnson is expected to put the withdrawal agreement bill to MP’s to be voted on, on Tuesday. If he wins the vote, he will speed the legislation through the Commons and Lords in time for 31st October deadline. According to analysis by the Financial Times, Boris Johnson has sufficient votes to win by a majority of 5 MP’s.
However, he also faces moves by opposition parties to amend the bill to try to force a second referendum.
There is no panic in the pound and at these levels investors are confident that a no deal will be averted.
|Why is a “soft” Brexit better for sterling than a “hard” Brexit?|
|A soft Brexit implies anything less than UK’s complete withdrawal from the EU. For example, it could mean the UK retains some form of membership to the European Union single market in exchange for some free movement of people, i.e. immigration. This is considered more positive than a “hard” Brexit, which is a full severance from the EU. The reason “soft” is considered more pound-friendly is because the economic impact would be lower. If there is less negative impact on the economy, foreign investors will continue to invest in the UK. As investment requires local currency, this increased demand for the pound then boosts its value.|
Euro Investors Look To Thursday’s ECB Meeting
With no high impacting economic data to digest, euros investors are looking ahead to the European Central Bank monetary policy announcement on Thursday. This will be President Mario Draghi’s final meeting before Christine Lagarde takes over.
After the central bank cut overnight interest rates and restarted its bond buying programme in September. Analysts are not expecting another move from the ECB so soon after September’s easing and particularly given that it is Draghi final meeting. Investors will listen carefully to the tine pf the central bank. Any hunts that there could be further easing in the near future could drag on the euro.
There is no high impacting eurozone data today. The eurozone economic calendar is quiet until tomorrow’s consumer confidence print.
|What do these figures mean?|
|When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written:
1 GBP = 1.13990 EUR
Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound
Or, if you were looking at it the other way around:
1 EUR = 0.87271 GBP
In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.