The Pound is now set for a volatile period ahead as we move into the Autumn and the political engine restarts today after the summer recess. Rates for GBP EUR should remain incredibly sensitive to any news relating to the ongoing Brexit negotiations. It is fair to say that Brexit will dominate the majority of Parliaments discussions and so any change of direction in where this is all heading should see the Pound react.
Whilst there are no specific Brexit debates scheduled for this week there will still be commentary especially after the claims that Boris Johnson made this week that Britain could be in a worse situation with the Chequers Brexit blueprint that is favoured by Prime Minister Theresa May. There are now strong calls from a range of politicians for a change of plan and possibly one that resembles a Canada plus type of deal. The uncertainty and prospect of a change of direction is making the markets uneasy and this is unlikely to change any time soon. Whilst both sides have been working toward October for an agreement it is widely expected that this will now overrun and could even drag on until December.
Meanwhile in the Eurozone it has been reported that Italy will ignore warnings by credit rating agency Fitch and push through higher Government spending to stimulate the economy which is at odds with what the European Central Bank and EU would like to see. There have been other reports that Italy is seeking a form of Quantitative Easing to keep the economy afloat. Investors have been dumping Italian debt after the ECB indicated the end of its asset purchasing scheme which have pushed borrowing costs in Italy higher. With such high levels of government and consumer debt it is only a matter of time before the focus is back on Italy which could prove negative for Euro exchange rates.
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