Jean-Claude Juncker, the President of the European Commission, signalled that the EU27 would adhere to the original deal negotiated with the former Prime Minister Theresa May, thus rejecting any possibility of a new deal being forged by Mr Johnson. A spokesman for the European Commission said: “President Juncker listened to what Prime Minister Johnson had to say, reiterating the EU’s position that the withdrawal agreement is the best and only agreement possible – in line with the European council guidelines.” Mr Johnson has also repeatedly stated his desire to remove the Irish backstop from future negotiations with the European Union, but this was also rejected as “unacceptable” by Michel Barnier, Europe’s Chief Brexit Negotiator.
As a result the pound is trading statically against many of its competitors this morning, with the prospect of a no-deal Brexit leaving UK markets feeling increasingly jittery.
Petr Krpata, a Financial Strategist at ING, said: “All of this uncertainty makes for a tricky few months for the economy, and this has sparked talk of a UK rate cut later this year.”
“Even so, the risks for the pound are intensifying.”
The euro, meanwhile, was supported comments from the European Central Bank (ECB) President Mario Draghi. While he made further hints of a rate cut in September he indicated that policymakers hadn’t considered a rate cut this month. He also stated that the risk of a Eurozone recession was low.
Today, meanwhile, will see the ECB’s publication of its latest survey of external forecasts.
The GBP/EUR exchange rate could recover if these point to increasing downside risks for the Eurozone economy.
However, as the UK Parliament will go on its summer recess next week, Brexit concerns are likely to hold back the GBP/EUR exchange rate as political uncertainties increase.
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