Grilled sausages on wooden board

What are the ‘sausage wars’, and what do they mean for British expats living in Portugal?

The pound-to-euro rate has had its ups and downs during the second week of June. After remaining relatively stable through Monday to Tuesday (trading at circa the 1.162 mark), it had a wobble on Wednesday, dropping to lows of 1.158.

On Friday, at the time of writing, the rate was back to highs of 1.1642. This relative calm comes in the face of an onslaught of news stories about June 21st (alleged ‘freedom day’ when everything should go back to pre-pandemic normality) being delayed.

All this suggests that whether June 21st is delayed or not, it may just be a moot point. Most UK businesses are already operating as normal, so the last hurdle may not have too much of an impact on the value of sterling — either positive or negative. Something we discussed in last week’s article.

For British expats living in Portugal and regularly exchange pounds for euros, this would spell good news. Market volatility is not good for expat life.

From one day to the next, not knowing the value of your home currency in relation to your destination currency can be a constant pain point for those who’ve moved abroad.

However, it could be that last week’s calm is preceding a storm. This weekend, investors will be glued to the headlines as the G7 summit takes place.

All eyes on Cornwall
The 11th to the 13th could make or break the pound-to-euro rate for June. Mainly due to the stories that have hit the news this week.

The leaders of the UK, US, Canada, France, Germany, Italy and Japan are meeting in Carbis Bay, Cornwall for the G7 Summit. Discussion points are the global recovery from Covid-19, and indeed, the ‘sausage wars’.

UK/EU tension has been rising due to the dispute over the Northern Irish protocol. Part of the protocol states that new checks will now need to be carried out on goods when they enter Northern Ireland from England, Scotland and Wales.

The UK has suspended many of the elements of the protocol with the aim to maintain the frictionless flow of foodstuffs.

This has caused huge discontent between the UK and the EU. To say French President Emmanuel Macron wasn’t happy would be an understatement.

“We have a protocol,” said Macron. “If after six months you say we cannot respect what was negotiated, then that says nothing can be respected. I believe in the weight of a treaty, I believe in taking a serious approach. Nothing is negotiable. Everything is applicable.”

Discontent led to such a point that European Commission vice-president Maros Sefcovic threatened the UK with a trade war, saying that Brussel’s patience with the UK was wearing ‘very, very thin’.

The dispute has been nicknamed ‘the sausage wars’ as the protocol covers chilled meats. But in actual fact, hardly any sausages move from the UK to Ireland.

How are the ‘sausage wars’ affecting currencies?
The ominous threat of a trade war between the UK and the EU has weighed heavy on the pound in relation to the euro last week. It could go some way to explaining why the pound-to-euro rate has struggled to break out.

US President Biden has now arrived in Cornwall with the intention to break the deadlock of the border disagreement.

Investors are concerned that if Biden fails, this could lead to the prospect of further EU tariffs and quotas. If this is the case, there’s a strong chance that this will become priced into the currency markets, and the bad news will push sterling down in the short term.

But how serious is it?
Despite some heated rhetoric from Macron and EU officials, it’s unclear what chance there is of it actually coming to a head.

It could be argued that the UK press has done its bit in exacerbating the tensions. On Thursday, The Times went with the headline splash: “Joe Biden accuses Boris Johnson of ‘inflaming’ Irish tensions”.

However, a senior US administration official claimed that the Times headline was ‘wrong’. In fact, the discussion where this was said wasn’t led by the President.
What’s more, recent history tells us that as always with Brexit dealings, political talk follows a reoccurring pattern. A lot of fire and fury followed by tempered decision making at the last minute.

As such, a number of investors still hold confidence in the strength of the pound for the rest of 2021. This week, the MUFG bank said they were looking to buy sterling against the dollar.

What does this mean for me as a British expat?
If this week tells us anything, it’s that Brexit and all the issues that come with it are very much still alive and kicking. Now that the issue of coronavirus has slightly abated, Brexit has reared its head again.

For a British expat living in Portugal who regularly converts pounds into euros, this spells a lot of uncertainty for the pound-to-euro rate.

Privalgo can take the sting out of this uncertainty. We offer solutions that allow you to lock in a favourable pound-to-euro exchange rate for a certain timeframe. For you, this means a degree of protection from market volatility.

To learn more about these products and solutions, follow the link below and get in touch. We can give you a quote and talk you through our solutions.

We’re Privalgo — specialists in foreign exchange. We are authorised by the Financial Conduct Authority (FCA) as an Electronic Money Institution. (Reference number: 900887)

Through leading exchange rates, zero hidden fees and innovative solutions, we help Brits save money and time when they move to Portugal. Get in touch today to see how we can help you build a rewarding foreign exchange strategy.