The Pound to Euro exchange rate dropped into the 1.07’s over the UK’s bank holiday weekend and has not managed to make any of the ground back against the Euro. Over the weekend Mario Draghi, President of the European Central Bank (ECB) confidently spoke about the Eurozone economy, suggesting even the likes of Greece were on the up. This has been directly translated into Euro strength with the currency also reaching multi year highs against the US Dollar.
Brexit uncertainty continues to hamper the Pound
Sterling is still suffering from the Brexit uncertainty, however now that the Government is back from the summer break we could start to see some more positive news. The UK and the EU’s negotiating teams are thought to be coming back to the table in the next few days, hopefully with more of an emphasis on business and trade. Both German and UK Industry bodies have spoken about the current dangers of not having trade as the main focus. Specifically the German car manufacturing industry have raised their concerns and have explicitly said the uncertainty is starting to affect them. With the main focus having been the fear towards British businesses, a domestic economy suffering may not be ignored by the EU.
Not all bad news for the UK
The UK’s economy is not struggling and in some areas, such as unemployment is at a several decade low. If there was to be a change in events and a post-Brexit trade deal does become a main focal point, then I would expect an almost immediate turn around in the Pound’s fortunes and a potential jump of a few percent in favour of Sterling. Whilst this may not come about during this year, the chances are at the turn of 2018 we could start to see more favourable movements for the Pound.