The GBP EUR exchange rate was 0.70% higher after Boris Johnson announced his resignation as Prime Minister. He clung to the job on Wednesday despite 40 resignations from ministers and aides, but Tory party members intervened. The pound sterling saw its strongest weekly rally since February as the confusion and uncertainty over his future cleared up.
EU energy ministers will attend an emergency meeting later in July to discuss a potential energy supply crisis plan for winter.
The GBP to EUR moved to 1.1778, which should see the end to pound weakness soon.
Boris Johnson resigns after a day of record resignations
Boris Johnson resigned as the Prime Minister of the UK after a record day for Parliamentary resignations. More of his previous supporters urged the PM to step down, including Priti Patel and Grant Shapps. Welsh Secretary Simon Hart was the latest cabinet minister to step down, while Attorney General Suella Braverman launched a leadership challenge.
Boris Johnson said that he still had a “colossal mandate to keep going” from UK voters, which defies recent polls and by-election results. However, he finally changed his mind after meeting with Sir Graham Brady, possibly related to the confidence vote outlook.
Johnson made his controversial move by sacking the Levelling Up Secretary Michael Gove, but that was his last act in Downing Street.
EU calls an emergency meeting over gas supply
European energy ministers will meet on July 26th. A few days later, the European Commission find a plan to curb gas demand due to fears of further cuts in Russian supply.
Dutch gas futures were higher this week after supply from the Yamal-Europe pipeline ground halted. There are now fears that the country will shut supply down further for annual maintenance, which will further squeeze European energy stockpiles. Germany and Italy are concerned about the outlook for winter.
The EU is backtracking its climate policy with the European Parliament backing gas and nuclear investment as climate-friendly. That follows German and Dutch moves to raise coal production.
Meanwhile, German city Hamburg, the largest non-capital city in Europe, may ration hot water due to the latest crisis. Jens Kerstan, environment senator for Hamburg, said that the city could restrict hot water to certain times of the day in the event of “an acute gas shortage.”
“We are in a much worse crisis than most people realize,” Kerstan said. He urged citizens to take shorter showers, avoid full baths, and install modern thermostats. “The more we save now, the better the situation will be in winter because the stores will fill up”.
These types of rules could become more commonplace as winter approaches in Europe. That could also impact different types of businesses, especially industrial ones.
In the German economy, industrial orders grew slightly in May, which beat analysts’ expectations for a fourth straight month of lower numbers.
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