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Pound euro exchange rate: GBP subdued as markets brace for May's Brexit brief | City & Business | Finance
Published On: Thu, Oct 11th, 2018

Pound euro exchange rate: GBP subdued as markets brace for May’s Brexit brief | City & Business | Finance

The briefing comes amid growing tension within her own party as well as with the Democratic Unionist Party (DUP) over concerns for what the final Brexit deal may look like.

The DUP has threatened that it could withdraw its support for the government if it disagrees with the final plan, with DUP leader Arlene Foster warning that she would reject any deal which created new barriers between Northern Ireland and the rest of the UK.

As Mrs May needs the DUP’s support in order to maintain her slim majority in Parliament, this could in theory see the government collapse if she fails to appease the small Northern Irish party.

On the other hand if the PM bends under pressure from the DUP and some hardliners within her own party, she risks derailing a possible Brexit deal with the EU, less than a week away from the next summit of leaders.

Given this precarious state of affairs, Mrs May faces a juggling act with today’s briefing, leading investors to err on the side of caution towards the pound this morning.

At the same time the euro remains rangebound as investors await the release of September’s European Central Bank (ECB) minutes this afternoon.

While the minutes are unlikely to offer any surprises regarding the bank’s policy outlook, the minutes could still result in some volatility in the single currency if there is any notable change in tone from policymakers given the recent upswing in inflation.

Looking ahead to the end of the week, movement in the GBP/EUR exchange rate is likely to be driven by the release of the Eurozone’s latest industrial production figures.

We could see the euro swing higher tomorrow morning if production growth has rebounded from -0.8 per cent to 0.4 per cent in August as forecast.

Meanwhile a lull in UK data means Brexit is likely to remain the dominant force behind the pound on Friday, with any positive progress in negotiations likely to help bolster Sterling sentiment.

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Pound euro exchange rate: GBP subdued as markets brace for May’s Brexit brief | City & Business | Finance