GBP/EUR Investor Confidence Slips With Return to Brexit Uncertainty
Brexit remains in the spotlight for the Pound, as cross-party efforts to avert a no-deal and increased optimism following Boris Johnson’s unexpectedly successful meeting with the German and French premiers last week saw a surge in Sterling.
Angela Merkel spurred the initial reaction when she suggested an alternative to the Irish backstop might be found within thirty days. GBP Investor optimism was bolstered further when French President Emmanuel Macron mirrored the German Chancellor’s words in an amicable meeting with the UK Prime Minister.
But optimism slipped toward the end of the week as Macron changed his rhetoric, referring to the backstop as ‘indespensible’. More disorder followed when President of the European Council, Donald Tusk addressed Boris Johnson at Sunday’s G7 summit and accused him of ‘gaslighting’ UK voters.
Euro Remains Subduded by Recession Fears and Italian Turmoil
Last week’s Eurozone PMI figures showed expanded growth in the bloc’s private sector for August but the gains failed to alleviate concerns for a German recession in the second quarter.
With no other notable data exerting an influence on the Euro, investor focus turned instead to the ongoing political turmoil in Italy. A fracturing of the former coalition saw the centre-left Democratic Party seek a union with the Five-Star Movement in an effort to avoid snap elections.
Thawing US-China Trade Tensions Could Signal Hope
President Trump said on Monday that China wants to reach a trade agreement, suggesting a potential de-escalation of ongoing US-China trade hostilities.
Trade tensions between the world’s two largest economies has a significant effect on the Eurozone, with a back-and-forth tariff war increasing pressure on European export businesses and diminishing Investor confidence.
China’s top trade negotiator, Vice Premier Liu He, said earlier in the week that China ‘firmly opposes the trade war’, adding ‘it is not conducive to China, the US [or] the interests of people all over the world”.
An easing of the US-China situation could exert a positive influence on the EUR and offer some relief to fears for a German recession.