Sterling Sees Boost from EU Re-Engagement Hopes

The British Pound has seen significant movement as EUR/GBP falls, indicating potential weakness in the Euro and a shifting UK narrative.

Chris Turner at ING notes that the decline of EUR/GBP is partly due to emerging independent eurozone issues. The usual hedge for eurozone political/budgetary risk, EUR/CHF, has been driven by rate spread stories rather than traditional euro weakness.

The UK's potential re-engagement with the EU has also caught attention, particularly after Prime Minister Andy Burnham's speech on moving closer to Europe and possibly rejoining the EU after the next election. According to Turner, markets would likely view this positively, as they did during the 2016 Brexit vote when Sterling crashed.

The foreign exchange market is watching for potential support in the Sterling into a planned UK-EU summit scheduled for November 20th.