GBP/EUR Exchange Rate Rangebound Ahead of Election Result
The Pound Sterling to Euro (GBP/EUR) exchange rate is in a holding position this morning, as markets await the result of the Conservative leadership election.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1111, slightly down from this morning’s opening rate.
Pound (GBP) Volatility to Rise as Boris Johnson to be Confirmed as PM Today?
Markets remain bearish towards the Pound (GBP) this morning, as investors steer clear of the UK currency as they await the results of the Conservative leadership election later this morning.
Unless there is a major upset, Boris Johnson is widely expected to be announced as the new Tory leader today, before taking up office as the New UK Prime Minister on Wednesday when Theresa May formally steps down.
Barring an historic upset, Boris Johnson will be named Conservative leader before noon in London https://t.co/JcMRCbLhsC
— Bloomberg (@business) July 23, 2019
While his victory in the leadership contests has been forecast for some time, Johnson’s ascension to PM is still expected to stoke volatility in the Pound in the coming weeks as his premiership is expected to cast fresh uncertainty over Brexit.
Analysts from Rabobank explain.
‘Hard Brexiteer Johnson is favourite to take over from PM May. However, the parliamentary arithmetic has changed and he will struggle to deliver his “do or die” pledge to leave the EU on October 31.
‘Johnson’s ultimate solution would be a hard Brexit and he may even consider suspending parliament … Essentially, political uncertainty will not diminish and will continue to weigh on sterling in the coming months.’
Unsurprisingly the focus for GBP investors through the remainder of the week will likely remain on political developments in the UK, with the spotlight on who the next PM will appoint to their cabinet.
A number of senior Tories have already stated they will not serve under Johnson due to their opposition to a no-deal Brexit so it’s likely we will see quite a few fresh faces, whose untested nature and likely support for a hard Brexit could prove negative for Sterling.
GBP/EUR Exchange Rate Forecast: Dovish ECB to Soften the Euro?
Looking ahead, movement in the Pound Euro (GBP/EUR) exchange rate may be not be entirely driven by UK politics this week in the face of some high profile Eurozone data releases.
Centre stage for EUR investors this week will of course be the European Central Bank’s (ECB) latest policy meeting.
Economists are currently divided on what the ECB may do this week, with most expecting the bank to only alter its forward guidance this month, while others suggest its will attempt to stay ‘ahead of the curve’ by announcing a rate cut of 10 basis points on Thursday.
In the meantime, potentially offering some indication on which way the ECB may vote will be the publication of the Eurozone’s latest PMI figures on Wednesday, with the Euro likely to move lower if private sector growth in the bloc slowed this month as economists forecast.