Over the past week, we have seen GBPEUR & GBPUSD begin to rise following positive comments after Boris Johnson’s meetings with Macron & Merkel- in an interview on Sunday he stated that a better deal is now “More likely” than it was before, which is positive news for Sterling exchange rates. The reality is, we know that the Government will be very wishy-washy about a deal or no deal until they actually have a final conclusion, and a further extension in October is still possible, so, for now, nobody is getting too excited.
This week, GBPEUR has opened above 1.10 and GBPUSD above 1.22 which is a pretty good gain considering we were as low as 1.06 against the Euro and 1.19 against the Dollar 2 weeks ago. It seems that technically, the market is now in a reversal, providing the Government doesn’t mention anything about a No Deal. It seems that GBPEUR has scope to reach 1.12 again if we do get further positive news from the UK and EU talks.
One potential risk we have is that Boris Johnson could call a snap election to increase his majority in Parliament so he can push through the Brexit plan he gets if this is so then I do expect to see Sterling come under pressure again until that election is over.
Inflation is the key release for the EU this week, which is expected to show a slight increase for last month. The expectation is that the ECB will cut rates in September and increase QE which will undoubtedly affect Euro exchange rates.
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