Pound vs euro: GBP falls against the euro
GBP has struggled to make any impact against the EUR this week, with the pair falling back towards 1.12. Whilst the pound has managed to find a level of support above this threshold over the past 48 hours, there is an anticipation that any major realignment against the single currency is unlikely to occur in the short-term.
The on-going uncertainty which has engulfed the UK economy for much of the past three years remains, with no clearer path identified by the government as to how they will finally deliver Brexit and ultimately the people’s vote.
This uncertainty has sapped investor confidence and risk appetite for GBP and as a result the value of the pound has been severely hampered.
The euro, despite some of the growing economic problems inside the Eurozone, has been one of the main benefactors of sterling’s downturn. This has seen GBP/EUR rates trading at lower levels than perhaps they should have been, thus giving euro sellers an extended window of opportunity to trade at some very attractive levels.
Looking ahead, and how the pair will develop will no doubt be inextricably linked to how Brexit progresses from this juncture and whether the incoming Prime Minister can forge a more positive public perception, and ultimately deliver on the people’s vote.
The chances of Brexit being finalised by the extended deadline of October 31st is certainly debatable. Whilst the markets never stand still, I am not expecting any aggressive upturns back towards the 6-month high for sterling, which saw it trading above 1.17 against the EUR not that long ago.
The pound did find some support earlier this week against the EUR following Boris Johnson’s, the bookies favourite for next prime Ministers speech, campaign speech. In it he claimed he would deliver Brexit by the October deadline and was the only man that could help the Conservative party recover from its recent demise, and ultimately keep Jeremy Corbyn out of number 10 Downing Street.
Of course, what politicians say and what ultimately transpires does not always match and ultimately only time will tell whether or not too much damage had already been done.
My opinion remains that the UK will look to extend Article 50 beyond the revised deadline of October 31st, a scenario which will lead a further period of uncertainty for both the UK economy and ultimately the pound.
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