Pound Euro Forecast
There has been a strange reaction on GBP/EUR following the news that UK Prime Minister Boris Johnson has approval from the Queen to dismiss Parliament from 9th September to 14th October. This is an attempt to stop Parliament from blocking a ‘No Deal’ scenario from occurring.
Generally speaking, you would expect Sterling to weaken with the increased probability of a no deal. However, in this circumstance it could be considered that the break in parliament could force Brussel’s hand to give the UK a more favourable deal, knowing that the threat of a ‘No Deal’ is real.
We saw GBP/EUR hit a monthly high of 1.1080 during yesterday’s trading, only for it to fall to the high 1.09s, following the announcement of Boris dismissing Parliament. Sterling then recovered later during the trading day into the mid 1.10s.
The threat of a ‘No Deal’ is still real and the Pound will remain fragile until we have some form of clarity on Brexit. I am not convinced that Brussels will be willing to make concessions on the current deal. It is not in Brussel’s favour to let the UK leave with a favourable deal. If the UK were to leave with a favourable deal, what is there to stop other members of the bloc following suit?
Is the Euro going up or down against the Pound?
Italy, with huge debt now in excess of its GDP (Gross Domestic Product) could be a country that would like to leave the EU. They have also been threatened by the EU with a huge fine, should Italy not make necessary arrangements to bring the debt into line. It could be the case that Brussels is making Brexit as difficult as possible, in order to avoid a domino effect.
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