The pound slid back against the euro yesterday, dipping just below the 1.12 handle, leaving it in a vulnerable position today. The pound is currently trading at a rate of 1.1136 against the euro according to Bloomberg at the time of writing. This is lower than Tuesday’s 1.1191 percent against the euro.
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Michael Brown, Currency Expert at Caxton FX, spoke to Express.co.uk to provide exclusive insight into the current exchange rate.
“Sterling struggled against a stronger euro on Wednesday, as the common currency gained ground after a potential game-changing announcement of an EU-wide recovery package, including the issuance of common debt,” he said.
“Today, geopolitics will remain in focus, with the latest round of Eurostat sentiment surveys likely to be ignored.”
Despite focus remaining on the coronavirus vaccine and “geopolitics”, it seems that the UK’s own economic strain is still the centre of attention.
Unemployment levels are expected to more than double this summer, according to The Guardian.
In April alone, 70 percent of all people in the UK were claiming unemployment benefits, hitting a record of 2.1 million.
Meanwhile, others believe that Brexit negotiations with the EU will dictate investor appetite.
George Vessey, UK Currency Strategist, Western Union Business Solutions said that Brexit negotiations are still fuelling sterling demand.
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He said: “As well as renewed risk appetite fuelling sterling demand, rumours have emerged that the EU may be willing to drop its current maximalist approach on fisheries in negotiations with the UK next week.
“This sign of a potential compromise on fishing rights may indicate more EU concessions are possible and this should boost demand for the pound.
“GBP/USD started the week near $1.21 and charged towards $1.24 yesterday.
“Up until yesterday, there was increasing fear of a no-trade deal Brexit unfolding at the end of this year due to the impasse in UK-EU trade talks over the last few months.”
Mr Vessey also explained that the ongoing coronavirus pandemic and government lockdowns have taken up a lot of “government time” but the UK has said it still plans to leave the EU in January next year.
He continued: “The spread of coronavirus and the lockdowns have also soaked up a lot of government time, energy and resources, so many had assumed an extension to the transition period would be required.
“However, the UK government insists the UK will leave the bloc with or without a trade deal by January 1, 2021.
“Concerns over a no-trade deal outcome were weighing on the pound, and although we are a long way off from a free trade deal, there appears an air of optimism that is supporting sterling.
“UK Chief Negotiator David Frost will give a formal testimony on the progress of the negotiations on the UK’s future relationship with the EU.
“A potential move towards $1.24 may be seen again in the near future, but GBP/USD faces a downward trendline at the $1.2350 mark which may inhibit this run higher.
“A U-turn might open the door to a test of the $1.20 level again should sterling sentiment sour.”
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