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Euro to Pound Sterling Exchange Rate Outlook Edges Higher as UK Polls Continue to Tighten

Euro to Pound Exchange Rate Gains Limited as UK Political Hopes Persist

The Euro to Pound Sterling (EUR/GBP) exchange rate edged higher when markets opened this morning, as investors were hesitant to keep holding the Pound (GBP) near its highs. Fresh signs of tightening in the UK polls left the Pound less appealing.

Still, hopes that Britain’s General Election next week could lead to a relatively soft Brexit outcome ultimately pushed EUR/GBP lower last week.

EUR/GBP opened last week at the level of 0.8587 and trended with a downside bias throughout the week, ultimately closing at the level of 0.8519.

Since markets opened for this week, EUR/GBP’s gains have been modest at best. EUR/GBP trends close to the level of 0.8536 at the time of writing.

The Euro to Pound exchange rate may not have much reason to fall in the coming week unless UK election optimism drives the Pound higher still.

Euro (EUR) Exchange Rates Find Modest Support in Finalised November PMI Stats

Last week, the Euro (EUR) found some fresh support as many of the week’s most notable Eurozone ecostats beat forecasts.

However, while the Eurozone’s confidence appeared to be improving and inflation was stronger than expected, analysts were still concerned that the improvement would be temporary and would not lead to a prolonged recovery in the Eurozone.

As a result, today’s better than expected Eurozone PMI stats further bolstered hopes that the Eurozone could be recovering, and gave the Euro some support this morning.

Not only did the PMI projections published earlier in the month beat forecasts, but the finalised PMIs beat projections in some key prints.

Germany’s final November PMI rose from 42.1 to 44.1 rather than the expected 43.8, and overall the Eurozone’s manufacturing PMI came in with a softer-than-forecast contraction of 46.9.

Pound (GBP) Exchange Rate Appeal Softens as UK Election Polls Tighten

Last week was another bullish one for the Pound, as despite fresh signs that Britain’s election race could be tightening, a major poll indicated that the ruling Conservative Party was on track to win a comfortable majority.

The seat-by-seat ‘MRP’ poll, published last week by YouGov, left markets confident that the Conservatives would win the election and pass its relatively soft Brexit plans. This was the primary cause of the Pound’s strong performance last week.

However, while bets of a Conservative majority are still quite strong and this is keeping the Pound supported, the latest polls continued to show that the race may be tightening ahead of the election next Thursday.

According to a weekend poll from BMG, the opposition Labour Party is now within just six points of the Conservatives:

‘With less than two weeks until polling day, our latest vote intention numbers show Labour starting to close the gap. The shifts we have witnessed in our headline voting intention figures take the Conservative lead from a likely majority into possible hung parliament territory.’

Euro to Pound (EUR/GBP) Exchange Rate to Remain Focused on Eurozone Data and UK Polls

In terms of Eurozone data, this week started out on a positive note as Eurozone manufacturing PMIs beat forecasts. With slews more Eurozone data due for publication over the course of the week, the Euro could see notable movement.

Wednesday will see the publication of the Eurozone’s final November services and composite PMI results, followed on Thursday by Eurozone employment, growth and retail sales stats.

Fresh German factory data is also due towards the end of the week.

If this slew of Eurozone data beats forecasts, it could boost hopes that the Eurozone economy is recovering from months of slowdown, and the Euro is more likely to sustain some kind of recovery.

However, if UK election hopes continue to dominate the Pound’s movement, EUR/GBP’s potential for recovery may be limited.

While polls show the election race is tightening, any fresh signals that the Conservative Party will still win a comfortable majority would boost Sterling and keep pressure on the Euro to Pound (EUR/GBP) exchange rate.