The Pound has dipped against the Euro today, falling to an exchange rate of 1.1314. This decline comes at a time when the Conservatives have still not reached an agreement with the Democratic Unionist Party (DUP).
Pound Crash Predicted if Tory-DUP Deal Turns Sour
The near and longer-term movement of the GBP EUR exchange rate may be for high volatility. This is mainly due to the proposed union between the Conservative and Democratic Unionist Party (DUP).
Broadly speaking, it is still expected that the two parties will come to an agreement to form a majority government. However, any signs of an ‘unholy union’ are likely to lower trader confidence and weaken Sterling.
The DUP was previously seen as eager to form a government with the Conservatives, as it would provide them with additional funding and power in running Northern Ireland.
Recent DUP statements have thrown a spanner in the works, however, with DUP officials saying;
‘[Talks] haven’t proceeded in the way we would have expected. Conservative high command ought to stop their backbenchers whingeing about the DUP and show our party some respect’.
Further muddying the issue, the DUP has ominously warned that the party ‘can’t be taken for granted’.
Putting on a brave face has been Conservative First Secretary of State Damian Green;
‘Clearly, [we are] two political parties, we have some differences. But we [also] have a lot in common. We’re both unionist parties at our heart. We’re both obviously very concerned with combating terrorism, we both have similar views about delivering a good Brexit for this country and obviously we’re both very concerned with the Irish border issue. All talks of this kind take a long time, and they’re still continuing’.
If the Conservative-DUP deal goes ahead, the Pound may rise against the Euro. On the other hand, any signs that it is a tenuous agreement may conversely weaken Sterling significantly.
Euro could Advance if Macron’s Purge Pays Off
The Euro may rise in value against the Pound in the future, if French President Emmanuel Macron’s government is well received.
So far, the Macron presidency has run into a few teething problems, mainly associated with the supporting MoDem party. At the time of writing, three MoDem ministers had resigned, due to investigations into their funding activity.
Macron was elected on a promise to clean up corruption in government, so this news is largely being taken as a sign of policy in action.
If Macron’s ‘housecleaning’ brings stability after the current turbulence, then the Euro may appreciate on a fresh wave of trader confidence.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1316 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8837.
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