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Pound Euro Exchange Rate News: GBP/EUR Wavers amid Political Uncertainty Weighs Heavy

July 15, 2022 - Written by John Cameron

Pound (GBP) Wavers as Political Uncertainty adds to Social Unrest

The Pound (GBP) is trading rangebound today as a strong of political and social issues weigh on the UK. Uncertainty surrounding Boris Johnson’s replacement drags on, as well as fresh strike actions to compound the ‘summer of discontent’.

With the final five candidates announced in the Conservative race for Prime Minister, the first televised debate will take place today. Rishi Sunak and Penny Mordaunt still lead the race, with Liz Truss, Kemi Badenoch, and Tom Tugenhadt still in the hunt.

With contrasting tax plans, and shared firm pro-Brexit stances, investors are concerned with how the new Prime Minister will tackle crucial issues that continue to weigh on the economy. At the expense of the popularity vote, inflationary pressures could worsen if some of these proposed tax cuts come to fruition.

Meanwhile, Brexit woes look to pile more pressure on the Pound as the Northern Ireland protocol bill could be passed as early as next week. Investors are concerned of a potential trade war with the EU as legal action has been threatened if the UK would tear up the post-Brexit agreement signed only three years ago.

Elsewhere, the ‘summer of discontent’ heats up as more railway strikes are announced, as well as warnings of NHS doctors walking out over pay disputes. Widespread industrial action is set to disrupt travel this summer as RMT confirm drivers at 14 train operating companies will walk out for two days in August. This comes in the wake of another pay-related walkout set to happen at the end of this month. Mick Lynch, the union’s General Secretary said:

‘The rail industry and the government need to understand that this dispute will not simply vanish. They need to get serious about providing an offer on pay which helps deal with the cost-of-living crisis, job security for our members and provides good conditions at work.’

Meanwhile, Professor Philip Banfiel, Chair of Council for the British Medical Association, warns that doctors could walk out after years of neglect have left the NHS threadbare. A proposed 30% pay rise over the next five years has been tabled, to make up for pay cuts since 2008. Banfiel added:

‘Doctors are angry, frustrated and feeling undervalued. There is very, very serious discontent (about pay). After 14 years are doctors worth 30% less? No. I mean, if anything they are worth 30% more.

‘It’s almost inevitable that the path taken by whatever government happens next will lead us into direct collision with them. Why are we doing it? If you don’t have doctors, you don’t have the NHS.’

Further disruptions to the UK economy is likely to weigh on the Pound as the cost-of-living crisis and inflationary pressures continue to wreak havoc.

The Euro (EUR) Under Pressure from Italy and China

The Euro (EUR) is yet again under the cosh as multiple headwinds threaten to weigh on the single currency even further.

With news of the Italian Prime Minister Mario Draghi has announced his resignation in the face of the mounting cost-of-living crisis gripping Italy. The former head of the European Central Bank (ECB) has led a coalition government since 2021, but has seen support diminish, plunging the country into crisis.

Elsewhere, worrying data out of China has added fuel to the fire of global recession fears as GDP contracted by 2.6%, printing far below an expected 1.5% contraction. With Covid cases on the rise and threats of another economic slowdown with looming lockdowns, global supply issues are set to worsen. As global recession fears edge closer, the Euro could come under increased pressure.

GBP/EUR Exchange Rate Forecast: Domestic Woes to Weigh on the Pound?

Looking ahead, data remains thin on the ground for the rest of the day, which could leave both the Pound and Euro susceptible to market sentiment.

With growing domestic unrest likely to weigh on Sterling, and the global recession fears cranking up pressure on the Euro, volatility across the market is expected.

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