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Pound Euro Exchange Rate to Climb on UK Political Stability?

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GBP/EUR Exchange Rate Strengthens as New Prime Minister Finally Announced

The Pound Euro (GBP/EUR) exchange rate firmed as the prolonged political uncertainty has seemingly ended as Liz Truss becomes the new prime minister.

At time of writing the GBP/EUR exchange rate is around €1.1593, a 0.30% jump from the morning’s opening levels.

Pound (GBP) Buoyant as Truss Wins and Promises Fiscal Aid

The Pound is rallying against some of its rivals as hopes of a substantial financial aid package looks to ease the burden of soaring living costs.

Liz Truss, the frontrunner in the Conservative leadership, has beaten Rishi Sunak and is set to replace Boris Johnson as the new prime minister. Narrowly edging her rival with 57.4% of Tory votes, Truss immediately stated her plans for tackling the energy crisis, as well as out of control inflation and the cost-of-living crisis.

Addressing the nation at her victory speech, Truss reassured that she fully intends to announce her financial support plans within a week of taking office, including tax cuts and ongoing energy supply issues.

Looking ahead, GBP investors, along with the rest of the UK, will be keenly waiting on any further news in regard to financial aid that Truss promised throughout the campaign and in her victory speech. Once a substantial plan has been revealed, Sterling could be boosted as the new prime minister will be keen to get her reign off on the right foot.

Euro (EUR) Under Pressure amid Looming Energy Crisis

The Euro is struggling for demand today in the wake of Russia shutting off the vital Nord Stream 1 pipeline. State-owned Gazprom announced this morning that they have cut gas supplies to Europe after failing to reopen the line after a three-day planned maintenance.

The single biggest supply of gas from Russia to Europe, the Nord Stream pipeline is key to preventing a potential gas shortage for the whole of Europe. Strategists at Commerzbank warn that gas rationing will have to be imposed if supplies are not met. They said:

‘Although extremely high prices provide a significant incentive for (gas) savings, this does not appear achievable. Rationing is probably inevitable in this case. In that case, the recession we already expect would be much more severe.’

Looking ahead to the rest of the week, and the Euro could continue to fluctuate on news emanating from Russia and the potential gas crisis.

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