UK Prime Minister Threatens EU With Budget Veto, Sending Pound Euro Exchange Rate Into A Spin

Published: Monday, 8 October 2012 09:00 BST - Written by James Fuller

STORY LINK UK Prime Minister Threatens EU With Budget Veto, Sending Pound Euro Exchange Rate Into A Spin

The weekend market close has one again brought a significant market development, this time in the form of comments from UK Prime Minister David Cameron which may serve to drive a stake between policymakers in Brussels and London. Cameron used a television interview to confirm that he would consider using the UK’s veto in order to scupper the European Union’s latest budget. With just over two years of the British coalition government’s parliamentary term remaining, Cameron appears to be distancing himself from his Liberal Democrat partners in an attempt to shore up the Conservative party’s core vote. The upshot of Cameron’s words viewed through the complex prism of the currency markets is difficult to quantify – does the UK need the EU more than the EU needs the UK? Who knows, but the early part of this week’s session in the currency markets will provide an acid test of this.

Meanwhile, political manoeuvrings are also stealing the headlines on the other side of the Atlantic, as the US’s two Presidential Candidates pick over the bones of Friday’s highly surprising American labour market data, which revealed that the rate of unemployment in the world’s largest economy had dropped to its lowest level since the start of 2009. Cynical analysts would suggest that sharp dip in the jobless figure in the States is down to a ‘massaging’ of the figures by the current White House incumbent rather than a miraculous pick-up in the US economy, with the nation due to vote next month. Friday’s jobs data had the initial effect of turning the market against the US Dollar, as stock markets picked up ground thanks to a broad improvement in risk sentiment. This sent the GBP USD exchange rate back above 1.6200 briefly on Friday, but the pair couldn’t maintain this level and ended the week at 1.6136.

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