GBP/EUR hits nine month high (Daniel Johnson)

Sterling hits nine month high against the Euro

Sterling hit a nine month high today against the Euro. The spike was caused by several contributing factors. Lord Jim O’Neill gave a very positive forecast on a recovery for the UK economy post Brexit early in the week. This was coupled with news that Dutch and Spanish finance ministers would like a close relationship in regards to trade with Britain. Angela Merkel, the German Chancellor also announced her intention to have a close bond with the UK post-Brexit. This was key, as Germany is the engine room of the Eurozone, but this is not necessarily a surprise due to the large volume of German exports to the UK, particularly cars of which the UK is a large consumer.

There is however concerns for Sterling. The biggest of which is Phase two of Brexit talks. Chief negotiator for the EU, Michel Barnier and UK Chief negotiator David Davis are at loggerheads. Barnier would like the financial sector included in any deal and Davis has stated Brussels will not be able to cherry pick aspects of the deal. Davis is clearly not happy, EU services have apparently been approaching UK companies and advising them to leave the UK or risk losing their contracts. The deal is set to be initially agreed in October, but I feel this target is unrealistic as is a full exit by 2019. I think talks could well prove problematic and I think Sterling could suffer as a result.

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