The news that Theresa May will become the new Prime Minister of the UK saw Sterling rise 1 cent against the Euro. Italy is the latest member to hit the headlines with its banking crisis, could we be looking at more bailouts?
It has now been decided that Theresa May will become the UK’s 54th Prime Minister and this news saw GBP/EUR rates gain by over a cent during yesterday’s trading period, lifting some of the uncertainty following the Brexit vote two weeks ago. Any economic uncertainty, which we have seen much of in recent times, has the ability to create a very volatile marketplace and this news has already been welcomed by investors.
When announcing her bid to take over from David Cameron in June, Theresa May stated that she would not trigger Article 50 (the mechanism in place to begin the departure from the EU) for at least a year, removing yet more uncertainty for the time being, anyway.
The Eurogroup met in Brussels yesterday afternoon for their first meeting since the UK voted to leave the EU. The main topics of discussion were the effects of the outcome on Europe and the Eurozone in particular. Although there is still a high level of uncertainty surrounding the subject, they reiterated their commitment to continuing growth friendly fiscal policies, in particular for Spain and Portugal, and resolving issues in the banking sector. They stated that Ireland is making good progress and is no longer reason for concern, and that they would continue to work with Portugal to help them along the same road.
Although the Eurogroup meeting had a more positive tone, the IMF have warned that things aren’t looking so bright for Italy, who are expected to see two decades of stagnant growth and therefore recession. As this is the third largest country in the Eurozone, this news has already had a negative impact on the Euro, as we have already seen GBP/EUR rates back above 1.18 this morning.
May Industrial production figures are released tomorrow at 10am for the previous month and year, and are both expected to show a decline following the downward trend since March this year. On Friday at 10am we will see Trade Balance data, which measures the difference between Imports and Exports of goods and services, released. This will be followed by the latest Consumer Price Index data for the previous month and year. If these releases are as expected, combined with growing confidence in the UK from gaining a new Prime Minister tomorrow, we could see Sterling recover some of its losses against the Euro this week.
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