GBP EUR Edges Higher but Further Downside is Likely

GBP EUR Edges Higher but Further Downside is Likely

The GBP EUR exchange rate was flat on Monday after last week’s sell-off but the next path is likely lower. The euro has gained from last week’s Bank of England (BoE) meeting, where the outlook for the British economy was revised lower. The political pressures continue to hover around the pound sterling with a new Northern Ireland government, led by Sinn Fein, set to rattle the Westminster cage.

The GBP to EUR trades below the 1.1700 level and will look for support below there.

Northern Ireland back on the agenda for the pound sterling

Liz Truss has been warned to “dial down” talk of ripping up the Northern Ireland Protocol on Monday by the EU’s Brexit negotiator with the UK set to meet in Belfast.

Maros Sefcovic, a European Commission vice-president, said British politicians should be “honest about the deal they signed” instead of plotting to override the Brexit deal after recent local elections.

“We need the UK Government to dial down the rhetoric, be honest about the deal they signed and agree to find solutions within its framework,” he said.

His comments came after growing suggestions the UK Government could introduce legislation to scrap parts of the Brexit withdrawal agreement relating to Northern Ireland due to trade frictions.

Talks have been in deadlock for months, but the Northern Irish leaders are on the warpath.

Michelle Donelan, the universities minister, said “nothing is off the table” during the negotiations.

“Our priority is to deal with the priority head on,” she told Sky News on Monday. “We have a duty towards the people of Northern Ireland. They are a fundamental part of the UK.

“The Northern Ireland Protocol is not working, and I believe the concerns about that were reflected in the recent results we saw in the election. We are working at pace to resolve this. Nothing is off the table.”

Europe has previously warned that there would be repercussions for the scrapping of the protocol, which could see them tear up the Brexit deal which would be bad news for the pound.

Sinn Fein looks for a quick move to a new government

Sinn Fein has told the British government it must not “hold the people and society” of Northern Ireland “to ransom” by delaying the creation of an executive government.

Michelle O’Neill, who is set to become first minister of the Stormont Assembly if a government can be formed, urged ministers in Westminster to get the “executive up and running today”.

Sinn Fein became the largest group in the Northern Ireland assembly after last week’s elections but attempts to form a government, which must include a first minister and deputy first minister from Republican and Unionist parties under the Good Friday Agreement, still have to be resolved.

Sinn Fein, which is the former political wing of the IRA, became the first nationalist party to win the most seats in the Northern Ireland Assembly in its 101-year history.