The pound has struggled to gain any strength against the euro in recent weeks in light of the coronavirus lockdown and its subsequent impact on the UK economy. However, there was some joy yesterday as sterling managing to claw its way to a higher position for the first time in three days.
The pound is currently trading at a rate of 1.1105 against the euro according to Bloomberg at the time of writing.
In comparison with yesterday’s rates, it’s a welcome growth of around 0.08 percent.
However, experts say that the post-Brexit trade talks which started yesterday and are set to rumble on in the coming weeks will likely have a major impact on the exchange rate.
Speaking exclusively to Express.co.uk Michael Brown, currency expert at Caxton FX, said: “Sterling gained ground for the first day in three yesterday, benefitting from the firmer risk appetite seen in US equity markets which pushed the S&P 500 to a record close.
“The pound will, however, likely become increasingly driven by political developments in the coming days, as the latest round of post-Brexit trade talks continue in Brussels.”
Hopes of a deal being struck could see positive gains for the pound.
The Prime Minister’s spokesperson has suggested a deal could be secured as early as next month.
However, following yesterday’s trade talks, Brussels rejected the UK’s haulage requests, describing them as “fundamentally unbalanced”.
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UK officials demanded continued wide-ranging access to the EU for British truckers, a request the EU member states were not content with.
“UK-EU trade talks resume today and go on throughout this week, which leaves sterling vulnerable to enhanced volatility,” explained George Vessey, UK currency strategist at Western Union Business Solutions.
“Last week, positive chimes about a deal being reached before October sent sterling spiking higher briefly, once again demonstrating its sensitivity to Brexit-related news.”
There are also mounting concerns surrounding “financial rules” and how these will change moving forward.
Mr Vessey continued: “Another key focus in this next round of negotiations is whether the UK financial sector will have access to the EU’s market once the transition period ends on December 31, 2020.
“A main concern amongst investors is whether Brussels accepts UK financial rules as equivalent to the EU’s.
“Earlier this month, some financial services companies announced they will be moving trading jobs out of London to avoid a potentially disruptive no-deal scenario or at least limited trading activities.
“There is still a great deal of uncertainty in many areas of trade talks but with financial services being such a prominent part of the UK economy, any disruption to this sector will likely send the pound tumbling.
“The EU summit in October is gearing up to be the next big deadline as officials say the bloc needs at least 11 weeks to ratify any agreement.”
With so much uncertainty ahead, Britons hoping to get away on a European holiday may be worried about securing the best rates.
The good news is, with most travel money providers now reopen after the lockdown, it is possible to shop around and compare rates.
According to Karen Gee, business development director for foreign currency provider Spendology, the way to do this is to plan well in advance.
“With so much change in the world right now, it’s hard to predict when exchange rates will be at their best,” explained Ms Gee.
“There’s unprecedented volatility in the markets.
“So for someone who likes to get involved and do the research you can track the market yourself, wait until exchange rates increase and buy your currency when you judge it’s the best time bearing in mind your departure date.”
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