Pound to euro exchange rate: Sterling fails to recover amid interest rate and Brexit fears

The pound has struggled to recover against the euro for a second day this week.

Yesterday the exchange rate opened at €1.120 after a disappointing week of UK data.

Today, it held at €1.120 after a lack of UK data positivity.

Laura Parsons, currency analyst at TorFX, explained to Express.co.uk the disappointing UK exchange rate.

She said: “The pound spent Monday licking its wounds after last week’s losses and the GBP/EUR exchange rate closed out the day trading in the region of €1.120.”

A no-deal Brexit has also affected the pound as fears grow that it may come into fruition.

The UK is due to leave the EU next year in March 2019, and Foreign Secretary Jeremy Hunt told reporters in Berlin that there is a “real risk” of one happening.

He explained: “This is because I think that many people in the EU are thinking they just have to wait long enough and Britain will blink and that’s not going to happen.”

Some of the discussions on Brexit that are still undecided include the Northern Irish border and the trade in goods.

“Without a real change of approach from the EU negotiators we do now face a real risk of no deal by accident. And that will be incredibly challenging economically,” said Hunt.

An interest rate rise could also be pushed back after a disappointing first quarter of 2018.

Interest rates are expected to increase on 2 August from 0.5 per cent to 0.75 per cent.

This will be the second increase in a decade, after rates rose from 0.25 per cent to 0.5 per cent in November 2017.

The Bank of England has advised that it could continue to rise in the next few years up to two per cent.

However, if the UK economy fails to improve then this could be difficult to implement.

How could the pound improve later today and this week?

Ms Parsons explained:“We could see the pairing fluctuate over the next few hours thanks to today’s run of services and manufacturing data from the Eurozone and the UK’s business optimism report.

“Disappointing results from the Eurozone might help GBP/EUR recover lost ground.”

The pound hit a four-month low against the euro last week, as well as a ten-month low against the dollar.

Holidaymakers heading abroad to Europe may see themselves getting less for their money until the exchange rate recovers.