GBP EUR Weakness as Markets Await Next Prime Minister (James Lovick)

The pound vs Euro exchange rate remains at the lower levels as the markets attempt to guess who the next British Prime Minister will be. Rates for GBP to EUR have fallen to just above 1.12 on the expectation that the next Prime Minster will seek to ensure that Britain is out of the European Union by 31st October 2019. The markets now await any Conservative leadership news as the course of action on Brexit will be heavily directed by the next Prime Ministers views on the matter.

There are currently 7 candidates in the offing after yesterday’s first round which saw Boris Johnson way out in front. It is expected that the final two will be whittled down by Thursday of next week. A poll will be held on Tuesday with further votes to be held on Wednesday and Thursday if required. The pound to Euro exchange rate has dropped by over 4% in the last month on the expectation that a no deal Brexit may become a viable option despite the reluctance of parliament to allow this to happen.

Boris Johnson has been clear that he wishes to leave the no deal possibility very much on the table and use it as a negotiating tool, something that parliament had previously voted against this year. The division in parliament over a no deal Brexit continues to keep the markets guessing on how the British economy will fare and how the pound will react. After the Labour party lost an important vote in parliament this week to stop a no deal Brexit from happening the markets are becoming increasingly nervous for a no deal. Expect considerable market volatility for GBP EUR as we await the next Prime Minister.

The Euro faces a tough economic future after the ECB has indicated that the central bank for the bloc is prepared to take the necessary action when required to head off an economic downturn. Mario Draghi reiterated his comments this week when he said that the bank is “ready to use all the instruments in to the toolbox”. Despite the

The German Bundesbank has also reduced its growth forecasts for Germany to 0.6% this year down from 1.6% that was expected in December highlighting weakness in the engine room of the EU economy. The US China trade war and fears of a global slowdown as well as Brexit are all having a negative impact in the EU as well as the global economy.