The GBP EUR exchange rate was 0.35% higher on Wednesday despite the resignation of two senior cabinet members from Boris Johnson’s government. There were more resignations on the day. It seems only a matter of time before there is a challenge for the Conservative leadership. That will add uncertainty to the pound sterling, but the rise in gas prices due to Russian supply cuts and low inventories will impact the euro.
The GBP to EUR moved to 1.1678 and it may be that the European gas problems can sustain the recent low in sterling.
Javid and Sunak shock Downing Street with double resignation
The embattled UK Prime Minister Boris Johnson was rocked by the resignation of two of his most senior cabinet officials on Tuesday.
In a coordinated move, Sajid Javid and Rishi Sunak tendered their resignations and said in a letter that “we cannot continue like this”.
The public expects the UK government to conduct itself “properly, competently and seriously,” Sunak said. He added that these standards were worth fighting for and that is why he resigned.
The resignations came as Mr Johnson made a televised address admitting a “mistake” in promoting Chris Pincher, despite being warned about his behaviour outside of Parliament.
For the pound sterling, markets have not reacted with volatility, likely down to confusion. Traders and analysts will now be working on deciding who may be the next Prime Minister and Chancellor and what that means to the country.
Norwegian government steps in to stop gas strike
The Norwegian government intervened after workers’ strikes at gas fields threatened to exacerbate the energy crisis engulfing Europe.
Natural gas prices moved to four-month highs on Tuesday after Norwegian oil and gas workers shut down three North Sea oil fields over a pay dispute. The Norwegian government proposed a wage arbitration to settle the problem.
The government normally exercises restraint before it intervenes with compulsory wage arbitration. Labour Minister Marte Mjøs Persen said the serious consequences of the escalations forced him to intervene.
The Norwegian oil and gas employers’ lobby warned that the strikes could halt almost 60% of Norwegian gas exports to Europe from Saturday. That would be catastrophic for the bloc, which is reeling from slowing Russian supply.
The Ministry of Petroleum and Energy asserted it would be “indefensible” to stop gas production. Not only is production dramatically falling, it is also “highly critical” as the EU and UK depend on their energy partnership with Norway.
Tomorrow brings the release of Dutch inflation figures, which hit highs of 8.8% last month. A higher number would add further pressure to the ECB ahead of its monetary policy meeting later this month, with a 25-50bps rate hike expected.
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