The pound continues to make a strong recovery against the Euro with 1.20 potentially on the horizon. GBP EUR broke over 1.19 yesterday after comments from Brexit Secretary David Davis who said that he would consider paying into the EU budget to secure the best possible access to the single market. This was taken by the markets very positively as it could mean a softer Brexit is an option.
There may have been an overreaction here with a jump of 1% against the Euro bearing in mind David Davis didn’t really say that much at all. He used the word “consider” which suggests to me that anything could still happen in these Brexit negotiations which will commence in 2017.
Nonetheless it has helped support the pound and more news like this will only help see the pound strengthen. The Richmond by-election which was won by the Liberal Democrats last night due to Brexit politics has also provided another small boost for the pound.
It is surprising as I would have thought Heathrow would have been by far and away the most pressing issue facing that particular borough and West London but that is the politics of the day.
UK construction data from the Purchasing Managers Index is one to watch this morning and any decline in this sector will be seen as bad news for the pound.
Euro Volatile ahead of EU referendum
This weekend sees the important referendum on constitutional reform in Italy which should create a huge amount of volatility for the Euro. Should Italian Prime Minister Matteo Renzi lose the vote then he has signalled that he will resign.
This would lead to political instability at a time where there are many banking problems within Italy. The wider implications spill out into next year’s European elections being held in France, Germany and the Netherlands.
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