Sterling fell against the euro during yesterday’s trading, with the euro strengthening on the back of the EU’s unveiling of their Coronavirus recovery package for member states.

The plan, which still needs to receive the backing of member states, will see the EU borrow on the market to raise €750bn in grants and loans to help aid economic recovery across the bloc. They will also ensure that it’s split fairly in order to ensure there is growth and recovery across the board. It is thought that Spain and Italy will receive a large proportion of the fund, seeing as their economies have been severely damaged by the lack of travel and tourism due to the rapid spread of the virus. Soon after the news the euro gained by almost 1% against the pound and this has offered some excellent opportunities for euro sellers to take advantage of.

What Could Happen to Sterling Exchange Rate in the Event of a Brexit Trade Deal?

Could There Be Further Losses Ahead for the Pound?

The pound could also suffer further losses going forward, with concern still looming over the prospects of a no-deal Brexit. There are now fears that progress on talks will not be made by the end of June and the government could therefore turn their efforts to preparations for a cliff edge Brexit. As we have seen historically, the pound tends to lose value when the chances of a no-deal increase and talks breakdown, so any clients with a sterling requirement should continue to closely monitor updates and developments on this topic as they are likely to have a significant impact on the pound’s value.

The EU have recently stated they feel the UK need to make concessions and cannot ‘cherry-pick’ the benefits from the EU that are not available to other nations who have a free-trade agreement with the bloc. This has resulted in fears of a stalemate. UK and EU negotiators are due to pick up talks again next week and there will be a conference at some point in June to evaluate what progress has been made towards the deadline at the end of this year. Keep in contact with your account manager to ensure you’re kept up to speed with the latest Brexit developments and the impact on the currency market.

For the remainder of this week there are some economic data releases from the EU and UK that could have an impact on GBPEUR exchange rates. This morning there are Consumer and Industrial confidence figures released for May which are likely to give greater insight into the impact of the virus. Tomorrow sees a raft of data from Germany and France, along with UK house prices. The Bank of England have recently warned that house prices could fall by 16%, but there have been reports of a high level of activity in the sector since the market reopened in recent weeks.

US Data

USD Rates Steady Despite Ongoing Tensions with China

USD rates remained steady yesterday and made small gains against sterling, mainly due to the fears of a no-deal Brexit. This was despite tensions between the US and China continuing to rise over China’s plans to impose a new security law over Hong Kong which would threaten some of the territory’s freedoms. In response to China’s move, US Secretary of State, Mike Pompeo, has stated that Hong Kong would no longer receive special treatment under US law. This has angered Beijing, as it would mean Hong Kong’s status as a special trading hub with the US would be revoked and would be extremely damaging for the economy.

US Jobless Claims Expected to Hit Record High

Today could see increased volatility on USD exchange rates as there is a raft of data set to be released throughout the day that will give an insight in to how the US economy has coped through the Coronavirus pandemic, which has seen deaths top 100,000 across the nation. It is expected to be announced that more than 2 million Americans will have sought unemployment benefits for a 10th consecutive week and that the number of people on jobless benefits will reach a new record high for Mid-May. Preliminary GDP figures for Q1 will also be released, along with durable goods orders which measures the costs of orders planned to last for three years or more and is a good barometer of business confidence. It is likely these data releases will cause shifts in the dollar’s value, so keep in touch with your account manager to find out how your currency transfer needs are affected.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.