The Pound Euro (GBP/EUR) exchange rate softened as the UK’s plans to unilaterally alter the Northern Ireland protocol has picked up steam as parliament voted in favour of the change, much to the chagrin of the EU.
At time of writing the GBPEUR is trading around €1.16, relatively unchanged from this morning’s opening levels.
Pound (GBP) Exchange Rates Fluctuate as Brexit Troubles add to Social Unrest
The Pound is under pressure today as it initially plummeted to a 13-day low before recovering as legislation to scrap the Northern Ireland protocol passed its first hurdle in parliament. The majority voted in favour of unilaterally altering the Brexit agreement, 295 to 221, despite heavy criticism from across the board.
Amongst the detractors, former prime minister Theresa May has called the proposed bill both illegal and unnecessary and threatens to diminish the UK’s reputation around the world. With the EU previously stating that legal action will be pursued if the UK moves ahead with the change, a potential trade war could weigh heavily on the Pound.
Shadow foreign secretary David Lammy condemned the bill, stating it was illegal and would damage the UK’s reputation:
‘This bill is damaging and counterproductive. The strategy behind it is flawed. The legal justification for it is feeble. The precedent it sets is dangerous, and the timing could hardly be worse. It divides the United Kingdom and the European Union.’
If the bill passes, as expected, the fallout could be a potentially damaging trade war between the EU and the UK. The Pound could be subjected to further turbulence if the EU chooses to retaliate.
Elsewhere, social rest is expected to continue as Royal Mail workers have begun voting on whether to stage planned walkouts over pay disputes. Coming off the back of both railway workers and barristers staging strikes, Royal Mail workers could be just the latest industry to join discontented workers who are seeing wages not keeping up with inflation. A union spokesperson said:
‘Britain’s postal workers are being forced into accepting a massive pay cut by the same people they have generated incredible profits for. Our members are going to food banks while bosses reward themselves with advance bonuses.’
With the cost of living soaring in the UK, the Pound could come under increased downward pressure if social unrest continues to spread in the UK.
Euro (EUR) Exchange Rates Waver as Hawkish Lagarde Fails to Boost Investors’ Spirits
The Euro is strengthening today as the European Central Bank (ECB) Forum kicks off in Sintra, Portugal today. Buoying investors from the offset was ECB President Christine Lagarde as she delivered a particularly hawkish speech.
Confirming the central bank’s commitment to raising interest rates by 25bps in July, whilst signalling a steeper rate hike is possible for September. Lagarde also outlines the central bank’s forward guidance:
‘If inflation outlook does not improve, we will have sufficient information to move faster. Beyond September, a “gradual but sustained” path of further rate increases will be appropriate.’
GBP/EUR Exchange Rate Forecast: BoE Speech to Rally the Pound?
Looking ahead, a potentially hawkish speech from Bank of England (BoE) Governor Andrew Bailey could provide a much-needed tailwind for the Pound as he is set to make a speech at the ECB Forum tomorrow.
Elsewhere, further speeches from the ECB Forum could inspire further movement for the Euro as several key Eurozone data releases are set to print tomorrow.
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