The pound has held firm against the Euro this week after the sudden drop in the price of sterling seen last Friday, after Prime Minister Theresa May made a strong speech whilst maintaining her vision of Brexit with the Chequers proposal. Rates for GBP EUR have traded within a tight range as the markets await more information on where Brexit is heading. GBP EUR has been hovering around 1.12 but is struggling to move much higher due to general uncertainty over Brexit. UK Prime Minister Theresa May has signalled that Britain will seek to lower taxes post Brexit having pledged the lowest business rate tax in the G20. The speech which is expected today in New York could result in movement on the Brexit negotiations and may impact on GBP EUR. If last week’s speech is anything to go by this could be one to watch with high volatility to be expected and potential opportunity for buying Euros.
Many would argue the biggest threat to the price of sterling could be a Labour Government in power. Considering the response from businesses to some of the proposals put forward at the Labour conference there could be some truth in this. A general election would need to be called first and this seems unlikely, bearing in mind we had a general election last year and the fact that Theresa May has now ruled it out before Brexit, stating it would not be in the national interest. There is though a chance there could be an election due to any political developments outside of the Prime Ministers power. If for example Theresa May was unable to push through her Brexit blueprint in Parliament then this could trigger a vote of no confidence so there are some significant risks for the pound.
Economic data in the EU also appears to be cooling for the moment after manufacturing Purchasing Manager Index data fell to a four month low in September. Business confidence has also fallen and some of the falls in the data could be stemming from the trade tariffs that Donald Trump has imposed. Although the trade disputes between the EU and US have largely settled down there could be more activity on this front. Certainly the China and US trade wars look far from over which is likely to feed through as uncertainty for the Euro.
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