The British pound is down against the euro on Thursday.
- Stock markets dive day after Federal Reserve meeting
- Michael Gove rules out extending transition period (again)
- EU to list non-EU countries allowed to travel by July 1
- Pound-euro exchange rate is lower by -0.97% for the week
GBP/EUR was lower by 100 pips (-0.90%) to 1.1106 as of 3pm GMT.
The currency pair dropped below 1.12 in early European trading, never looking back until reaching 1.11, where it stands roughly now.
GBP: No extension still
Investors are running scared after yesterday’s Federal Reserve meeting and currencies perceived to be riskier like the British pound are under pressure. Haven currencies like the US dollar and the Japanese yen are the only net-gainers.
If there were any doubt whether Sterling would drop alongside broader market sentiment, comments from UK Chancellor of the Duchy of Lancaster Michael Gove reaffirming ruling out extending the Brexit transition period made it so.
Stranger things have happened with Brexit but it would be quite shocking if this close to the June Summit the UK suddenly decided it would ask for an extension. The new ‘real’ deadline is October when all negotiations are supposed to stop.
EUR: Easing external travel restrictions on July 1
At yesterday’s meeting, the Fed promised to keep its bond purchases at current levels for the next few months. That has seen investors piggy-back bond prices higher and in the process bring down bond yields. (As a reminder bond yields fall when bond prices go up). That drop in yields reverberated across other assets that had performed well on bets of a global ‘reopening’ like the British pound.
The euro was faring better than many G10 currencies amid the renewed US dollar strength, supported by more good news on the reopening of the European economy. EU regulators suggested on Thursday that “Member states should agree on a common list of non-EU countries for which travel restrictions can be lifted as of 1 July, to be reviewed on a regular basis.” Quite how many people will choose to travel under current circumstances is another matter.
