This month the 160,000 Tory members will vote on who they want to be the next Prime Minister and the verdict will be announced on the 23rd July. If the polls are correct and Boris takes over at No. 10, the chances of crashing out of the EU without a deal increases (some analysts are suggesting we’re seeing this partly priced into Sterling exchange rates already), therefore there is an expectation the GBP/EUR exchange rate will face further downward pressure. However if Jeremy Hunt manages to beat the odds and win, the GBP/EUR rate could recover some of the losses it has seen over the last 8 weeks. Overall it is a tricky period to predict exchange rates and it does look like rates will remain fairly range bound (€1.1130’s - €1.1230’s) over the coming week.
Market sentiment for the GBP/EUR rate is on a downward trend at time of writing. Sterling has begun the week weaker after this morning’s weaker than expected GBP data. A small but growing number of global banks are forecasting Sterling exchange rates to move lower in the coming weeks and month, suggesting political uncertainty and a slow down in the UK economy as the major risks for the UK currently. Keys levels to keep an eye out for will be the €1.1180’s If we see the rate move LOWER than this for a sustained amount of time, then the likelihood of the rate moving into the low €1.11’s will be high and a move towards €1.1080’s will be more likely.
With PM May on the way out and most likely Boris on the way in, a number of analysts have begun to forecast more pain for Sterling exchange rates. We'll know who the new PM will be by the end of July but speculation and comments from those lined up to replace May will be closely watched for signs that they'll push for a Hard or soft Brexit.
The GBP/EUR rate spiked higher towards €1.1750's late Friday on rumours an agreement could be reached between May & Corbyn but as with most rumours, unless they are substantiated then exchange rates tend to fall back which is what we've seen since Friday.
“Brexit Is Back, And It's Already Being Described as The Most Disappointing Season Yet” Talks between Labour and Conservative officials are set to resume today after members of Parliament return to London from their Easter break. If a deal can’t be sealed before European Parliament elections are due to be held May 23, the prime minister’s allies fear she will lose her chance and could be forced out, according to the people, who asked not to be named.
Yesterday’s press conference at the EU emergency summit brought a six-month extension to the UK’s exit date (to 31st Oct), with a review on progress in June. Commission President Junker played down the importance of this review, stating that it was “not another cliff edge”. Sterling’s reaction was muted as markets look for more substantial updates that progress is been made with Brexit.
Today’s EU calendar was again very light and none of the data releases seem had much impact on markets. In the US, the NFIB small business survey will be watched for signs that confidence continued to hold up at the back end of Q1.
With market sentiment for GBP/EUR rate so volatile at the moment typical trends we’re use to seeing are changing by the hour. Thanks to the news coming from ITV, Sterling exchange rates are holding on to most of its gains from last week. Current key trading level is now around the €1.1660’s. If we see the rate move LOWER than this level for a sustained amount of time, then the likelihood of the rate moving into the high €1.1630s will be high. As with such high volatile times the rate could easily move up HIGHER on the back of an unexpected Brexit updates and if we see the rate move above €1.17’s for a sustained amount of time then we could see it push towards the €1.1770’s. It should be noted that on two occasions now over 2 weeks ago the rate pushed towards the €1.18’s but failed to push higher. Anyone hoping to achieve €1.18+ will need to keep in mind that the best chance of seeing this happen will be PM May getting her deal through the House of commons. This is in my eyes is the best case scenario for Sterling exchange rates and anything else won’t have as positive affect.
The pound reversed losses after the EU-27 leaders came up with a plan B in case the EU Withdrawal Agreement is not passed by the House of Commons next week. GBPUSD fell to 1.30 yesterday, but has recovered to around 1.3150.
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