The pound slumped yesterday after the UK fell into the worst recession on record. The unwelcome news confirms that the UK economy plunged when the government imposed a country-wide lockdown to curb the spread of coronavirus. Today, the coronavirus pandemic and the rate of economic recovery will drive the market.
Sterling is currently trading at a rate of 1.1055 against the euro, according to Bloomberg at the time of writing.
This is below yesterday’s rate of 1.1123.
Speaking exclusively to Express.co.uk, Rehan Ansari, currency expert at Caxton FX shared his insight into the current rate.
He said: “The pound lost ground against the euro yesterday following the UK’s widely expected weak GDP headline number for the second quarter of this year.
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Pound to euro exchange rate: Sterling ‘loses ground’ after UK’s GDP hits record downturn
Pound to euro exchange rate: The pound is currently trading at 1.1055 against the euro
“Although there were some positive components to the data, the pound to euro exchange rate managed to break below the 1.1100 support level it had held the previous day.
“Today, with little in the way of fresh data, market movement will depend on the latest coronavirus headlines and the anticipated rate of recovery after evaluating key data released earlier this week.”
News of whether more countries in Europe and across the world are going to be axed from the UK’s “air bridge” list are expected to be announced this week.
France and Malta are likely to be most at risk currently due to a sudden spike in coronavirus infection rates.
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The move could impact consumer trends towards booking holidays abroad.
George Vessey, UK Currency Strategist at Western Union Business Solutions said GBP continues to be driven by “risk appetite”.
He said: “The British Pound continues to be driven primarily by risk appetite and demand for the US Dollar and Euro.
“The US currency remains under pressure and Euro remains strong, which has helped GBP/USD firm above $ 1.30, but dragged GBP/EUR back towards the €1.10 mark.
Pound to euro exchange rate: “This also marks the worst quarterly drop since records began in 1955″
“Initially, market participants largely ignored the dismal UK data yesterday morning, but throughout the day sterling selling intensified.
“The second quarter UK GDP contraction of 20.4 percent represents the largest contraction reported by any major economy so far and twice as large as the US and Germany.
“The rebound in output in June offered a glimmer of hope for the UK economy, but in a world plagued with uncertainty, not only from coronavirus but also escalating geopolitical tensions, the pound is likely to be driven more so by external factors and risk sentiment in the short term.
“This time last year, GBP/USD was trading around $ 1.23, and only five months ago had fallen to a 35-year low of $ 1.14.
“Despite dipping slightly over the past week, the currency pair is currently still over two cents above its average rate of 2019 and four cents above its average rate of 2020.”
Ranko Berich, Head of Market Analysis at Monex Europe commented on yesterday’s UK GDP.
He said: “The GDP release confirms the UK experienced a historically bad economic contraction in the second quarter.
“However, comparisons to previous recessions are not particularly illuminating.
“Firstly, the 20.4 percent contraction in Q2 was caused by active shuttering of the economy which has since been reversed – hence we are likely to see a faster recovery of much of that activity than in, say, 2009.
“The 8.7 percent monthly jump in June supports this.
“Secondly, the Government’s furlough scheme has greatly delayed the labour market shock you’d associate with a recession of this magnitude, in the hopes of lessening long-term impacts to consumer behaviour due to job losses.
“The big questions about the UK economy are about the future, not the past, and remain unanswered. Most notably, of the more than seven million workers inactive or furloughed at present, how many will become unemployed and how many will return to work?
“Those that are made jobless will presumably change their spending behaviour – will this undermine the growth in consumer spending and the housing market that has recently encouraged the Bank of England?”
The Post Office Travel Money is currently offering rates of €1.0656 for amounts of £400 or more, €1.0811 for amounts of £500 or more, and €1.0867 for £1,000 or more.
Source Daily Express :: Travel Feed