The pound “slid” for a third day straight yesterday after the euro saw a welcome boost from the EU’s recovery fund agreement. Initially, the pound spiked at the beginning of the week but has since plunged against the stronger euro. Today, Purchasing Managers Index (PMI) surveys will determine the speed and extent of economic recovery which could have an impact on the exchange rate.
They measure the direction of economic trends in manufacturing.
China-US relations continue to impact sterling as the relationship between the two heavyweights dwindles.
Yesterday, the US Secretary of state Mike Pompeo called on nations to triumph over the threat of “new tyranny” from China.
The speech was controversial and likely worsened the already fraught relationship between the two nations.
George Vessey, UK Currency Strategist, Western Union Business Solutions said “rising geopolitical tensions” and the threat of no trade deal between the UK and the EU continue to have an impact on the pound.
He said: “The British Pound took a tumble yesterday following renewed risk aversion amid rising geopolitical tensions and the increasing concern that the Brexit transition period might end without a trade deal between the UK and EU.
“A UK-US trade deal also looks doubtful ahead of the US election in November.
One of the reasons sterling fell abruptly against most of its peers yesterday was the rumour that the UK government is now working on the assumption that there won’t be a trade deal with the EU before the end of the year.
“The bid to intensify talks, after no request to extend the transition period, has yet to show positive results and the government continues to urge businesses to prepare for a no-deal scenario, whereby the UK defaults onto World trade Organisation rules.
“Such a scenario is expected to send GBP/USD back under $1.20 and GBP/EUR potentially to parity.
Meanwhile, the UK government has also stated a UK-US trade deal is unlikely to be reached this year as well because the coronavirus outbreak has sapped all the energy and resources from both sides.
“Sterling remains stronger versus the US currency though as the dollar sell-off has accelerated.”
The Post Office is currently offering a pound to euro exchange rate of 1.0600 for amounts over £400, 1.0754 for amounts over £500 and 1.0809 for amounts over £1000.