The pound has had a turbulent few weeks but thanks to the EU’s recovery fund agreement, it appears the pound is experiencing an uplift. With not much going on other than coronavirus, eyes are turning to hopes of a vaccine and countries potentially seeing a second wave. The pound is currently trading at 1.1034 against the euro, according to Bloomberg at the time of writing.
This is marginally lower than yesterday’s rate of 1.1086, but is still above that crucial 1.10 handle.
Michael Brown, currency expert at Caxton FX, spoke to Express.co.uk regarding the latest exchange rate figures this morning.
He said: “Sterling ended the day modestly higher against the common currency yesterday, benefitting from a broad risk-on rally, and the ‘buy rumour sell fact’ reaction to the EU recovery fund agreement.
“Today, a rather quiet data docket awaits once again, meaning the pound should continue to take its lead from shifts in risk appetite.”
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“Although euro traders priced in the development weeks or even months ago, the significance of today’s deal is hard to overstate: there will finally be a joint European debt instrument.
“Although the €750billion package may be relatively modest in comparison to fiscal stimulus in the US, this is beside the point.”
Mr Berich explained the reason why the EU’s pandemic fund is so important to the recovery of some European countries’ economies.
“A mutualised debt instrument allows governments such as Italy and Spain to deploy recovery funds without further stressing their debt sustainability,” he continued.
“More importantly, it sends a signal to markets that the European Union remains willing to evolve in response to existential threats, and that in future crises the Union may be less reliant on unilateral heroics from the European Central Bank.”
George Vessey, UK Currency Strategist, Western Union Business Solutions said that the pound has seen a boost thanks to news of a coronavirus vaccine.
He said: “The British Pound is enjoying a welcomed boost following the promising news of a COVID-19 vaccine being developed by AstraZeneca and scientists at the University of Oxford.
“Sterling currency pairs shot higher yesterday, particularly against traditional safe havens such as the Japanese Yen, Swiss Franc.
“GBP/USD has climbed 2.5 percent this month and wrestles with a key resistance level this morning.
“The positive news was that an experimental vaccine appears safe and produced an immune response in early-stage clinical trials and although it’s too early to confirm it will control the pandemic, confidence has been lifted.
“There lacked a major jump in risk appetite across financial markets apart from the US tech stock index reaching record highs and currency market trends proved positive for the pound.”
Mr Vessey explained that the pound is not only seeing a welcome boost against the euro but other currencies such as the Australian dollar, the New Zealand dollar and South African Rand.
He continued: “GBP/JPY and GBP/CHF rallied nearly one percent higher yesterday and the pound even strengthened against risk-friendly currencies like the AUD, NZD and ZAR.
“Treasury yields remain downbeat though and gold prices are still elevated, suggesting investors continue to demand safer assets amid such uncertain times.
“The overly weak US Dollar has allowed GBP/USD to challenge the $1.27 handle, where the critical 200-day moving average resides.
“A break higher may accelerate the upside momentum towards $1.28, though over the past four months, this has acted as a stiff resistance.”
For those looking for travel money, the Post Office is currently offering a rate of 1.0685 for amounts of £400 or more, 1.0840 for £500 or more and 1.0895 for £1000 or more.