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EUR/GBP Exchange Rate Directionless as UK Prime Minister Faces Calls to Resign

EUR/GBP Exchange Rate Muted as UK Prime Minister Faces Pressure

The Euro Pound (EUR/GBP) exchange rate is trading flat during today’s session as the UK Prime Minister Boris Johnson admits he attended an outdoor gathering at N0.10 during the 2020 lockdown and is now facing calls to resign from both sides of the Commons.

At the time of writing, the EUR/GBP exchange rate is trading at around €1.8350, with minimal market movement.

Pound (GBP) Mixed as UK Politics Dominate Headlines 

The Pound (GBP) is muted against the Euro (EUR) as the UK Prime Minister, Boris Johnson, comes under scrutiny for attending a garden party during the first lockdown when outdoor gatherings were banned in England.

Having first ignored the reports, Johnson has now delivered his ‘heartfelt apologies’ to the British public for attending, what he is claiming to be, a ‘work event’.

Johnson has received some support from fellow MP’s and is asking for patience as Sue Gray, a senior civil servant, investigates the situation.

However, many MP’s – both Conservative and from the opposition – are calling for Johnson’s resignation, with a few members already contacting the 1922 Committee to register their Vote of No Confidence.

Sir Keir Starmer, Leader of the Labour Party, said:

‘There we have it. After months of deceit and deception, the pathetic spectacle of a man who has run out of road.

‘His defence…that he didn’t realise he was at a party is so ridiculous that it’s actually offensive to the British public.

‘He’s finally been forced to admit what everyone knew, that when the whole country was locked down he was hosting boozing parties in Downing Street. Is he now going to do the decent thing and resign?’

The volatility in UK politics is weighing on Sterling’s appeal during today’s session as the future of the country’s leadership comes into question.

Euro (EUR) Rangebound Despite Weakness in USD

The Euro (EUR) is trading in a narrow range against the Pound (GBP) despite the US Dollar’s (USD) weakness, which usually boosts EUR due to the negative correlation between the pairing.

However, the high coronavirus case numbers may be limiting the single currency’s potential as the World Health Organisation (WHO) has warned of a ‘tidal wave’ of Omicron infections across Europe.

Europe has reported an excess of 7 million new cases within the first week of 2022 which is double the infection-rate from the previous fortnight.

Hans Kluge, the WHO’s Europe director, said:

‘At this rate, more than 50% of the population in the region will be infected with Omicron in the next six to eight weeks.’

WHO’s senior emergency officer for Europe, Catherine Smallwood, has reiterated Kluge’s comments, stating that coronavirus is still ‘imposing new challenges’ and that the situation cannot yet be known as an ‘endemic’.

This is capping the single currency’s potential against Sterling.

EUR/GBP Forecast: Political Headlines to Continue Steering GBP’s Potential

Looking ahead, the Euro Pound (EUR/GBP) exchange rate is likely to remain susceptible to the developing coronavirus situation and UK political headlines.

On Friday, Sterling may be boosted by November’s GDP which is predicted to show an increase in economic growth from 0.1% to 0.4%.

Meanwhile, the Euro is likely to be impacted if the risk appetite changes. Should the market mood sour the resulting uptick in the US Dollar could weigh on the Euro.