GBP/EUR & EUR/GBP Update + Brexit News

Good morning everyone,

Politics will once again sets the tone for pound exchangers this week, as traders/analysts see political risks growing in the UK.

A march in London demanding a referendum on the final Brexit deal drew close to 700,000 people. Labour’s Brexit spokesman Keir Starmer called the demo “significant” as he reiterated his position that if May’s deal is rejected by Parliament, another vote should remain be option. But remember, there are some massive obstacles to a second vote. The Guardian cited pro-referendum campaigners saying there may be as many as 50 Tories who could back a public vote, but it will be easier to win them over if Parliament votes against May’s deal.

Brexit News

As mentioned last week Brexiteers are not happy however they are now not alone as pro-Remain members of the Conservative Party are also uneasy with PM May’s plans, and they are starting to speaking out. For some, it’s an opportunity to call on the government to change direction, whether that’s a second referendum or keeping closer ties to the EU. Just two more Tory lawmakers need to submit letters in order to trigger a leadership contest, the Sunday Times reported. And her Cabinet is now in revolt, according to the Telegraph, with ministers criticizing her concessions in an unusual conference call over the weekend.

This week May faces a perilous week at home. She will address Parliament today to tell them about last week’s summit in Brussels, and by Wednesday she faces the risk of a rebellion. Arch-Brexiteer Steve Baker has proposed amendments that would bind her hands in the Brexit negotiations: He wants to make the EU’s proposal for the Irish border illegal. That day she’s also likely to be asked to speak to rank-and-file lawmakers in her party in what could turn into a test of their appetite to oust her, Bloomberg have reported.

There’s still no clear candidate to replace May, and there’s still no majority in Parliament for a harder Brexit than the one May is pursuing. The Brexiteers still don’t have the numbers to replace her with one of their own. May has been here before, and has shown a remarkable ability to stagger on, in defiance of the usual rules of British politics. But we haven’t seen the last of the concessions May will have to make to get a deal, and her critics know that. Brexit Secretary Dominic Raab expects to be back in Brussels “sooner rather than later,” he told the BBC’s Andrew Marr on Sunday, as he said a deal needs to be done “towards the end of November.” The window is closing.

The week ahead

A lack of any real data today will keep the market’s focus trained on the ongoing Brexit negotiations. Politics will also be the main talking point across mainland Europe following the decision by Moody’s to downgrade Italy’s credit rating late on Friday. The decision comes ahead of an announcement from S&P, which is due on Friday. The European Commission has given Italy’s government a deadline of midday (11:00 BST) to explain the significant deviation the country has made from the EU’s budget rules with its higher-than-expected budget deficit in 2019. Comments early this morning, however, suggest that the Italian government will not be changing its budget plan. This situation looks to be gaining momentum and will most likely have an weakening effect on the Euro sometime soon. Economic data for the week sees mainly EU data

GBP/EUR & EUR/GBP Weekly Movements

With negative political news over the weekend the GBP/EUR exchange rate is holding up well and continuing to stay above €1.13 but as we are move away from the €1.14’s this could be a sign that markets are getting a little nervous on the possible Political outcomes in the UK. The GBP/EUR rate is continuing to test the resistance levels from last week, €1.1330’s. For those Low & Medium risk takers, the safe bet will be to make your exchange before Wednesday however for those medium risk takers who are feeling a little adventurous, then Italy’s budget showdown with the EU could hurt the Euro by the end of the week.

With market sentiment for GBP/EUR rate still on a side way/downward trend at time of writing - Current key trading level is around the €1.13’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 €1.12’s will be high). Traders are now suggesting that the rate will struggle to push higher until the UK political side of things become a bit more clearer hopefully by the end of this week. 

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