- EUR/GBP is rising in the Asian session and eyes are on a break of 0.8550.
- UK politics and economics are weighing on the pound.
EUR/GBP is higher by some 0.9% at the time of writing to trade at 0.8544 with the pound being hampered by troubles at Number 10 Downing Street. A slew of scandals has begged the question as to whether British prime minister Boris Johnson’s term is going to come to an abrupt end.
Two parliamentary by-election losses proved Boris Johnson's unpopularity. Now, an avalanche of resignations from various government members has left Johnson struggling for political survival. Nevertheless, the pound has held up reasonably well so far this week. Against the US dollar, the pound has managed to hold on to the 1.1900s for the most part but is failing to convince in the Tokyo session, with any advancements quickly met by sellers below 1.1930. This is helping EUR/GBP higher as the US dollar gives back a little ground to its peers in Asia.
Meanwhile, the economic conditions in the Uk are dire. Analysts at Rabobank explained that, arguably, the challenges facing policymakers in the UK are among the most complex in the developed world. ''UK CPI inflation has not yet peaked, and labour market strife indicates that higher inflation expectations may be already entrenched. However, UK consumer confidence has plunged, and, more recently, measures of business sentiment have also started to dive.''
Additionally, the analysts said, ''if expectations regarding BoE policy moves do not keep step with the hawkish guidance of the Federal Reserve, it can be argued there is a risk that GBP could weaken further. Yet, GBP is also proving sensitive to fears regarding growth. We see the risk of dips to GBP/USD1.18 on a 3-month view. We expect EUR/GBP to end the year at 0.88.''
