Pound to Euro rates remained fairly static over the weekend, with the Pound failing to make any inroads above 1.12 against the Euro.
The Euro continues to find plenty of support around this threshold, as the Pound continues to struggle amidst the on-going political and economic uncertainty the UK is currently facing.
Looking at the current Conservative leadership race and both Boris Johnson and Jeremy Hunt have been laying out more of their mandates, regarding how they would go about helping support the UK economy over the coming months and beyond.
Both stressed that whilst a no-deal Brexit was not a scenario they wanted, it was something that needed to be planned for in case this unfavourable outcome ultimately comes to fruition.
Hunt laid out a 6 billion Pound buffer with a drop in corporation tax from 19% to 12.5%. This would likely entice multi-national firms to base their activity in the UK. This is also expected to help farmers and fisherman keep their heads above water during these uncertain times.
Whether this mandate helps Hunt gain support only time will tell, but being the more vocal of the two candidates about the threat of leaving the EU without a deal in place, means the markets and ultimately the Pound, may react more favourably to a Hunt led government, and the Pound could make gains against the Euro should this outcome come to fruition.
Investors are currently shying away from GBP and with Business Confidence data near a seven year low and the economic outlook for the UK economy extremely dovish, the Pound could do with some positive news to help boost its value.
In truth, until investor confidence spikes the Pound is unlikely to make any aggressive inroads against the Euro, despite the growing economic problems facing the Eurozone economy.
ECB monetary policy could weaken the Euro
With the financial crisis in Italy deepening and the European Central Bank (ECB) considering starting another Quantitative Easing (QE) programme to help support their flagging economy, all is clearly not well inside the single bloc. If the ECB also choose to cut interest rates again, which would take the push the Eurozone into a state of negative interest, then the EUR could certainly see its value decrease as a result.
Combined with any slight upturn in Brexit talks or a change in market sentiment surrounding the UK economy, and the Pound could see its levels improve sharply. Due to the current negative climate, which has kept GBP marooned close to a six month low against the EUR, there is an argument that the upside gains are greater than the downside risk for those clients holding GBP.
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