Supreme Court Ruling to cause volatility on GBP/EUR
The Supreme court judgement is ongoing throughout January. It will decide whether the government will get the vote on triggering article 50. If they do there is the strong possibility of a soft brexit. There would be temporary trade deals in place while the new trade deals were ironed out. This would certainly bode well for the pound and I would expect GBP/EUR to breech 1.18.
Theresa May this weekend indicated her intentions for a hard Brexit during a Sky news interview. She stated she would give up free trade for control over immigration. Investors reacted and the pound plummeted in value. The implications of a hard brexit could be severe. Sir Ivan Rogers, the UK ambassador the EU thinks the two year target for an exit is unrealistic. He resigned, stating trade negotiations could take as long as ten years. If the government does not get the vote I would expect GBP/EUR to fall by as much as 4 cents.
Medium-Long Term Outlook
Despite the possibility for the Pound to weaken short term I feel there could be some big losses for the Euro medium-long term. There are three general elections within the next year. The Dutch election in Spring followed shortly after by the French election and finally the German election. All of which could see a far right party gain power. If this occurs in any of the elections there is the strong possibility of another referendum and the Euro will fall heavily in value.
Add into the mix the bad loans from Italian banks in excess of €360bn. terrible Eurozone inflation and the Greek debt crisis which won’t go away and the Euro could be in for a tough year.
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