Powers of negotiation
Callum McGrouther of Currencies Direct reflects on how the world’s most powerful political leaders are affecting the markets
It has been a fiery start to 2017, with the markets having to decipher the outcome of speeches given by political figures such as Theresa May and Donald Trump. As a result, sterling has been the biggest mover; after hitting worrying lows early in the new year, it has rebounded on the back of Theresa May warning European leaders that the UK is prepared to crash out of the EU if she cannot negotiate a reasonable exit deal.
Although May said that the UK could be the EU’s “best friend” if Article 50 talks went well, she also said she was prepared to walk away, which sent alarm bells ringing around the eurozone. The Prime Minister’s plan for a clean Brexit included a call for the UK to leave the single market and to avoid the EU’s immigration rules and being subject to the European Court of Justice.
While all eyes of late have been on the Brexit plan, there is expected to be a shift in the market to political risks within the eurozone as the French, German and Dutch elections take place this year. The political unrest across the eurozone and rise of the anti-populist parties could be a determining factor in potential euro weakness. In addition, the European Central Bank is still in the middle of its easing policy, which could put further pressure on the currency throughout the middle and back half of the year. currenciesdirect.com
GBP to EUR