GBP EUR Rates Remain on Back Foot on Brexit Uncertainty (James Lovick)

The Euro looks set for a volatile period ahead as old issues begin to resurface once again in the EU. Catalonia will soon be back under the spotlight as the current leader Quim Torra is about to relaunch a campaign for independence. Last year saw considerable volatility after there was unrest on the street between campaigners and a heavy handed approach by the Spanish authorities at the time of the referendum. This is a political hot potato and any developments could see further volatility for Euro exchange rates. Whilst any market reaction will be limited at this point in time, there is scope for a flare up in the coming months and is definitely one important driver for the direction of the Euro.

In the meantime Brexit will be the main driver for sterling exchange rates in these coming weeks and months as the withdrawal agreement is finalised. There is considerable opposition now to the Chequers plan which is being promoted by UK Prime Minister Theresa May. Expect fireworks at the conservative party conference where Boris Johnson is expected to ruffle some feathers and is likely to actively promote a harder Brexit.

It has been reported that the EU’s chief Brexit negotiator Michel Barnier favours a Canada plus type of arrangement and that he is also prepared to look at options to keep Northern Ireland in the EU customs union if there is no alternative to avoid a hard border. This would of course remove the need to have the customs border in the Irish sea which has been a bone of contention for the British side. Any further agreement on these thorny issues could see a boost for GBP EUR although clients looking to buy Euros could find themselves waiting for some time yet wit considerable risk to the downside.

For more information on Euro exchange rates and how to make the most of any opportunities in volatile currency markets then please feel free to contact me James at jll@currencies.co.uk