Pound vs Euro rates: UK and Eurozone economies facing crisis of confidence

GBP EUR Heads for the Yearly Highs Once More

Brexit uncertainty continues to keep investors away from the Pound

GBP has found only pockets of support this week against the EUR, failing to make any substantial inroads above 1.12. The pound has threatened to make a move, only to see its support wane as investors continue to shy away, as concerns over Brexit continue to cast a dark shadow over the markets.

New UK PM to shine light on Brexit approach

With the Conservative leadership race having been whittled down to its final two, those clients holding the pound will be hoping for a quick resolution and hopefully a clear mandate Brexit from the new Prime Minister.

What impact the new PM may have on any prospective negotiations with the EU is hard to gauge at this time, but assuming it is Boris Johnson who take up the mantle in number 10, then it is likely a far more hard-line approach will be taken with Brussels.

Whilst the markets are crying out for some tangible evidence of progress in Brexit talks, the fact that Boris Johnson is so committed to leaving the EU come the revised deadline of October 31st, means that a potential no-deal scenario is once again brought back into the spotlight.

Based on how the markets reacted when this outcome was on the table previously, means that a further downturn for GBP is a distinct possibility should it at any point look likely.

Whilst there is no guarantee that Johnson will win the leadership race and /or that a no-deal Brexit will come to fruition, even the outside possibility is likely to put pressure on GBP, or at the very least curb any substantial upturn in its value against the EUR.

Italian debt crisis causes concern for ECB

Looking at the Eurozone and with Italy back under the spotlight, with the ruling coalition party attempting to bring the Bank of Italy back under government control. This is a worrying development for the EU, which is already considering taking legal action against Italy for breaking budget deficit rules.

With Eurozone data also expected to show economic weakness later this week, the pound may benefit from the current downturn evolving inside the EU.

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