As we end the month the UK’s Prime Minister is coming under increasing pressure, not only from within her own party but from key figures within the EU reminding her that time is running out to agree the Brexit deal.
She will face the other 27 EU leaders at a summit in Brussels this week with Brexit being the focus tomorrow, with talks beginning around 9.00am UK time. The Irish Prime Minister, Leo Varadkar recently labelled the progression of the talks ‘disappointing’ and the EU’s chief Brexit negotiator has mentioned that ‘serious divergences’ remain over the backstop agreement (what happens in the event of a no-deal) and the on-going Northern Irish border.
The uncertainty is likely to be weighing on the Pounds value which is why the currency is still low against the Euro as well as other major currency pairs such as the US Dollar.
May has a chance to make some progress next month when she will brief all of her counterparts on the 6th of July at the Chequers. This plan is to agree on the UK’s blueprint for its future relations with the EU and with the pressure coming from both sides, I think she’ll be very keen to push forward with her plans.
There could be movement for the GBP/EUR pair over the next couple of days should there be any major announcements from the EU Summit will will conclude before the weekend. Next months behind closed doors talks at the Chequers could also create movement on the markets once the plans/outcome of the talks become public.
August could also offer the opportunity for the Pound to Euro rate to move quite dramatically as the markets bill the month as a ‘now or never’ chance for an interest rate hike from the Bank of England. Earlier this year the GBP/EUR rate hit it’s annual high when hopes of a rate hike in May were high. The BoE opted against raising rates owing to a cooling off of the UK economy, but should there be a high possibility of a rate hike in August I wouldn’t be surprised to see the pair climb back up into the 1.15’s at least.
There is also the chance of Euro weakness pushing GBP/EUR higher, as pressure mounts on Angela Merkel regarding the migration crisis, with EU Commission chief Jean-Claude Junker recently stating ‘The cracks are growing in size’.
In terms of economic data I think tomorrows GDP data at 9.30am UK time could be the major release, as if the quarterly figure is released below the expected 0.1% I think we could see a sell-off of the Pounds value. Do feel free to register your interest here if you wish to be kept updated regarding any major price movement for GBP/EUR.