Sterling was doing well at the start of the week, gradually increasing its trading rate against the euro day by day. However, yesterday set the pound back. Experts say it could decrease in value further if the Scottish elections results show majority support for independence.
The pound is trading at a rate of 1.1534 against the euro at the time of writing, according to Bloomberg.
Although this is above the 1.15 mark, sterling is today trading at a significantly lower rate than yesterday.
At this time yesterday morning, the pound stood at a rate of 1.1581.
Experts say that a “quiet calendar” awaits today, but things could change with the results of the UK elections, specifically the Scottish elections.
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Michael Brown, currency expert at Caxton FX, spoke exclusively with Express.co.uk to give his insight on today’s pound to euro exchange rate.
He said: “Sterling lost ground, modestly, against the common currency, despite a bullish set of forecasts from the Bank of England, as a ‘buy the rumour, sell the fact’ trade played out.
“Nevertheless, support at the 1.15 handle continues to hold firm.
“A quiet calendar awaits today, with the monthly US labour market report of interest broadly, but not to the cross.”
Mr Brown mentioned Bank of England’s meeting yesterday, which saw the firm’s Monetary Policy Committee get together for one of its eight annual meetings.
Some finance experts expected sterling to rise after the meeting. One of these experts was George Vessey, UK Currency Strategist at Western Union Business Solutions, who said yesterday: “The Bank of England’s (BoE) latest monetary policy decision and economic forecasts will be released at midday today.
“Some traders are calling for signs of policy tightening in the form of reduced bond buying or higher interest rates.
“Sterling could soar higher on such signals.”
However, there is hope for the pound to rise in the coming weeks as the UK’s economy continues to reopen. Mr Vessey said: “Although the BOE is expected to continue supporting the UK economy through the current crisis by keeping interest rates at record lows, a tapering of its bond buying programme could be announced today.
“If not, signs of it been reduced in the future could still be constructive for GBP upside. The UK’s economic reopening remains on track and households savings are record high levels.
“This pent-up demand is forecast to be unleashed and drive inflation higher, but unless it’s sustained, policy may remain relatively loose.
“Meanwhile, new economic projections will also be published by the BOE with expectations for growth and possibly inflation to be revised higher given the successful UK vaccine programme allowing the UK economy to gradually reopen.”
But Mr Vessey warned that Scottish results after the local elections yesterday could drive the pound lower if they see a pro-independence majority.
He explained: “The British Pound’s political risk premium might creep up if the Scottish National Party (SNP) win an outright majority at the Scottish parliamentary elections today.
“Such an outcome would likely trigger vigorous lobbying for a new independence referendum to be held in the future.”
Mr Vessey yesterday added: “Sterling volatility might not be too explosive today given the timeline of a potential referendum, but the result will be of great importance for the future of the UK’s economic landscape and thus the value of the pound.”
But what does all this mean for your travel money ahead of the foreign travel ban lifting on 17 May?
The Government is today expected to announce its travel green list, which will give Britons hopes of a summer holiday abroad.
Britons could be permitted to travel to European countries, including Portugal, Greece, and Malta.
However, some experts have warned against swapping travel money at this time.
James Lynn, co-CEO and co-founder of Currensea, said: “While it is tempting to take out foreign currency in anticipation of a holiday I would advise against this.
“Market movements are often more marginal in reality than they appear.
“Especially during this volatile time, it’s safer to keep hold of your money in your UK bank account than purchasing or exchanging for holiday money.
“Once we are allowed to travel again, this will hopefully signify the end of the COVID bump and I anticipate this will mean the pound will improve significantly.”
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