Pound to Euro exchange rates have started the week lower ahead of a crucial parliamentary vote to be held tomorrow (11th December) on whether parliament will accept the Brexit deal so far agreed. Rates for GBP to EUR have now fallen to below 1.1150 after weekend reports suggest that the vote will still go ahead as planned despite a growing consensus that Prime Minister will lose this vote.
It is more than likely that Theresa May will be unable to push through her Brexit deal in the Commons and with this carries a number of risks for the pound. If for example she loses the vote by less than 100 then there is every chance she may go back to Brussels and try and renegotiate the terms surrounding the Irish backstop. The worry is that this deal is so unpopular even amongst the Conservative Party that she could lose by as much as 200. A defeat on this scale could see the pound come crashing down as the uncertainty of a general election would likely follow.
If the vote is lost will there be a General Election?
If the Prime Minister lost by such a large number of votes then a motion of no confidence could be passed which could take the country in to General Election territory. The Labour Party has already signalled its readiness to govern in such a scenario and this prospect is a major threat to the price of sterling. The situation the United Kingdom finds itself in is unprecedented and clients should look to plan around this event with major volatility for GBP to EUR expected. If the Prime Minster was able to get the vote through then the pound will likely strengthen. Discussions between the EU and UK have been opened again surrounding the Irish backstop so there could be new developments today.
GBP to EUR rates: French riots could cause issues for the Euro
The Euro faces a volatile period ahead as French President Emanuel Macron struggles to fight to the gilets jaunes (yellow vests) who have rioted again at the weekend despite an offer from the President last week to freeze a fuel tax for months. President Macron is all of a sudden looking less popular having not delivered on his promises of major reform for France. He has also been dubbed a President for the rich after cutting a tax on high incomes immediately after he became President.
This doesn’t bode well for the Eurozone and hence the Euro as political tensions continue to create uncertainty. The French riots for the last four weekends have also been harmful to the economy and this is likely to reflect in a lower growth going forward. It comes at a time when both German and Italian Gross Domestic Product have dropped dramatically.
The European Central Bank will meet this week and should finally conclude the winding down of its asset purchasing scheme despite concerns that the EU economy might not yet be ready. Brexit however will almost certainly be the main driver for EUR to GBP rates.
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