The GBP EUR exchange rate rallied strongly this week with the resignation of Boris Johnson. After months of drama and allegations, the pound sterling shakes off recent uncertainty.
We may even see a more amicable fix to the Northern Ireland protocol. In Europe, the talking point is the ongoing fear over European gas supplies this winter. Russia shut the Yamal-Europe pipeline this week, which led to a surge in gas prices on the Dutch benchmark to four-month highs.
The GBP v EUR headed into the weekend, pushing for the 1.1800 level after the strongest week since February for the pair.
Pound sterling boosted after the resignation of Boris Johnson
The UK Prime Minister Boris Johnson resigned on Thursday despite a last-ditch attempt to cling to power. The PM saw a record of 40 resignations from ministers and aides in one day but said he still had work to do. His final piece of work was firing Michael Gove from the ‘Levelling Up’ role due to the political backstabbing.
For the pound sterling, it is a relief from months of uncertainty and drama. A new leader may give fresh impetus to the recent stalemate talks with Northern Ireland.
The leadership race will now begin in the UK. The country’s deputy prime minister, Dominic Raab, was a surprise contender to pull out of the race, effectively ruling himself out.
Former Tory leader and Prime Minister John Major said that Boris should not stay at Downing Street “for any longer than necessary” to help with the transition of the government. He asserted that the proposal for the prime minister to stay in office for up to three months after losing the support of his cabinet, government, and the parliamentary party is both “unwise” and “unsustainable”.
On the economy, the BoE Governor Andrew Bailey warned, but there are calls for an investigation into the bank’s slow-moving approach to interest rates.
Doug McWilliams of the Centre for Economic and Business Research said:
“We need to find out why – when others haven’t been too far out in their inflation forecasts – it has been consistently so far behind the curve”. He also blamed “the arrogance of official economic policymakers” and “groupthink” within the MPC.
Europe in the crosshairs of a winter gas crisis again
This week’s weakness in the euro resulted from the shutdown of the Yamal-Europe pipeline. Gas flows into Europe’s largest economy were at zero, which led to prices for the Dutch benchmark gas futures hitting a four-month high. The following day saw further pressure with the threat of strikes in Norwegian gas fields due to a pay dispute. This dispute threatened 60% of Europe’s gas supply. The Norwegian government intervened in the wage talks to avoid a full-blown crisis.
European energy ministers will attend a July 26th meeting with the European Commission to agree on a plan for the energy market. In economic data, Germany inched closer to a trade deficit for the first time since 1991, but industrial orders were slightly higher.
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