Pound to euro exchange rate: Sterling STORMS higher following Brexit £40bn bill
THE POUND has stormed higher after the German coalition talks collapsed yesterday, as well as the announcement of the Brexit £40bn divorce bill to start trade talks this December.
The pound is currently trading at €1.128, compared to yesterday's rates of €1.126.
It has been a steady week for the pound, having climbed from €1.116 last week after the release of UK data and inflation rates.
Negotiations by German Chancellor Angela Merkel to form a coalition government collapsed yesterday, meaning the pound was able to surge against the weakened euro.
The failed attempts mean that the largest economy in the Eurozone is now without a united government.
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Merkel has headed three coalitions since 2005 and has implied that a fresh election could be on the cards as opposed to a minority government.
The Free Democrats (FDP) pulled out after weeks of talks with Merkel’s conservatives and the Greens, stating irreconcilable differences.
The Greens hoped to end use of coal and combustion engines by 2030, with the FDP fearing what it could mean for jobs.
The new Dutch Foreign Minister Halbe Zijlstra told Reuters: “Germany is a very influential country within the EU so if they don’t have a government and therefore don’t have a mandate it’ll be very hard for them to take positions
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The country now faces uncertainty in the next few months, which could cause the pound to fluctuate
The country now faces uncertainty in the next few months, which could cause the pound to fluctuate even further.
Brexit talks regarding the £40bn divorce bill to be paid also played a part in the pounds recovery.
It is hoped that it will finally get talks going after paying the huge fee, which could start as early as December.
This can then start proceedings for the UK’s trade talks to take place that benefit the country after previous talked stalled.
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Laura Parsons, currency analyst at TorFx, explained what this could all mean in the next few weeks: “The GBP/EUR exchange rate rallied over 0.6 per cent on Monday to hit a high of €1.128.
“The pound was able to storm higher as the euro was weakened by the news that German collation talks had collapsed – leaving the Eurozone’s largest economy without a working government 2 months after the general election.
“Sterling also benefited from speculation that the UK will offer the EU a 40bn divorce settlement in order to break the current deadlock and progress with trade talks.
“Unless there are any developments in Germany, the UK’s public borrowing data is likely to be the main cause of GBP/EUR exchange rate volatility today.”
