The GBP EUR exchange rate rallied strongly last week after Boris Johnson’s resignation and started the week above 1.1800. A messy Conservative leadership race is underway with nine candidates already in the running for the Prime Minister role. In France and Germany, plans are being made for the ‘total cut-off’ of Russian gas supplies, which could wreak havoc on the German economy.
The GBP to EUR starts the week at 1.1800 with a potential move to 1.2000 in the weeks ahead.
France and Germany ‘prepare for total cut-off of Russian gas’
The French Finance Minister Bruno Le Maire said on Sunday that Russia totally halted gas supplies and the people must “prepare”.
“Let’s prepare for a total cut-off of Russian gas; Today that is the most likely option,” Le Maire said at a conference.
He added: “You also have to prepare load-shedding plans, we are doing it. It means looking in a very specific way at each company, each employment area; Which are the companies that should reduce their energy consumption and which are the ones that cannot.”
Le Maire noted that the government is drawing up a list of priority companies that would receive priority in the event of a gas shortage. “We have to anticipate and to put ourselves in order of battle as of now,” he said.
Germany is also in the cross hairs, and the Nord Stream 1 pipeline awaits its 10-day annual shutdown, with fears it may stay off longer.
Deutsche Welle warned of the threat and said, “the entire economy would be affected. Prognos estimated that if Russian gas supplies were to fail, Germany’s economic output could drop 12.7% by the end of the year.”
Nine Conservatives are in the running for a PM role
The GBP to EUR will have a leadership battle for 10 Downing Street in the background. Nine party members put themselves in the running.
The Labour party seized on that growing list of candidates, calling it a “chaotic catwalk of contestants”.
Transport Secretary Grant Shapps is one of the candidates for the role, and he told Sky News that he would introduce a 1p income tax cut “now”.
“If I become prime minister we’ll have an emergency budget, we’ll introduce that immediately,” he said.
Mr Shapps also wanted to “freeze” the planned increase in corporation tax, which he said was “…a tax which will not go up.” He asserted his belief in a “lower tax, lower regulation, cut-the-red-tape economy” in which the government lowers the walls for individuals and businesses to excel, helping them obtain “the best possible things they can in their own lives.”
The Conservative leadership race will have a bearing on the pound sterling versus the euro because of the types of actions from an eventual winner. Traders will want to see measures that curb the damaging effects of inflation and protect UK growth.
Meanwhile, Jeremy Hunt wants to cut the corporation tax to 15% to create a “pro-enterprise environment”.
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