Pound to euro exchange rate: Sterling slumps to its lowest level in 11 months
The pound sank to its lowest level in 11 months on Monday as it was revealed that the chances of a no-deal Brexit are are worryingly high.
Speaking to the Sunday Times, the fatalistic Secretary of State for International Trade Liam Fox suggested that a no-deal Brexit is looking increasingly likely, placing the chances of the UK crashing out of the EU without a deal at 60 per cent.
While Downing Street refuted his claim, Mr Fox’s comments have further dampened any hopes that talks have been progressing well.
Concern is now surging regarding the future of the pound, despite the Bank of England raising interest rates last week.
The pound is currently trading at €1.120 against the euro, according to Bloomberg.
Analysts say that markets could become unstable about UK-EU negotiations turning sour. This could lead to the pound dropping by an extra 10 per cent, according to the business and markets news site.
The pound is down from trading at €1.123 yesterday when stark factory orders data from Germany were published.
According to data published by Germany’s federal statistics agency, Destatis, domestic factory orders contracted by four per cent in June.
This is the worst slump since the start of 2017, and sees order growth contract to well below forecasts of a more modest decline of 0.4 per cent.
While factory orders are often volatile, analysts suggest that the sizable slump in June could be evidence that US tariffs are beginning to drag on global trade.
Carsten Brzeski, Chief Economist at ING, stated: “The June report could be a tentative sign of how trade tensions are hitting the German economy.
“Foreign orders from outside the Eurozone dropped by almost six per cent MoM.
“At the same time, domestic orders decreased by 2.8 per cent MoM.
“With the sharpest drop since January 2017, today’s new orders data do not bode well for German industry going into the second half of the year.”
The pound euro exchange rate could tick higher today, however, following the publication of Germany’s latest industrial production figures.
Given the sizeable fall in orders in June, it is a fair assumption that factory output is also likely to have taken a hit, with a larger-than-expected contraction in production in the Eurozone’s largest economy likely to hurt the euro.
Meanwhile, with the UK’s data all focused at the very end of the week, movement in the pound over the next couple of days is likely to be driven by developments in Brexit.
This means we will likely see Sterling remaining on the defensive throughout the first half of the week, should negotiations continue to stall.
To get the best currency exchange rate, holidaymakers should not convert their foreign money as soon as they return.
It could mean losing out if the current rates are at a low.