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Pound Sterling to Euro (GBP/EUR) Exchange Rate Slips on German Factory Rebound but Outlook Remains High

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Pound to Euro Exchange Rate Benefits from US-China Trade Hopes

Despite predictions for a month of UK political uncertainty ahead of next month’s UK Election, the Pound Sterling to Euro (GBP/EUR) exchange rate saw solid gains yesterday as the Euro (EUR) tumbled.

This follows last week’s modest and narrow GBP/EUR rate movement, which saw the pairing edge slightly higher from 1.1576 to 1.1585.

GBP/EUR has already touched on a two week best level of 1.1646 and though GBP/EUR slipped back from that high overnight, the pairing is still trending near 1.1629 at the time of writing.

Demand for the Euro has improved a little today thanks to fresh German data, but yesterday’s gains came on the strength of rival currencies and global trade news. As hopes remain high for an end to the US China trade war, the Euro remains under pressure.

Pound (GBP) Currency Rate Steady as Investors Anticipate Launch of UK Election

GBP Investors have been cautious this week as markets braced for a month of volatile political news and the start of the 2019 UK election campaign.

The general election will be held on the 12th of December but promises to be highly unpredictable and until solid results come in, the outlook remains shrouded in uncertainty.

With this lack of clarity, the Pound has been moving more in reaction to rival currency movement than domestic developments.

Investors even brushed over a trio of slightly better-than-expected UK PMIs for October, amid concerns that four more months of Brexit uncertainty is likely to lead to subdued economic activity.

Euro (EUR) Exchange Rates Edge Higher on German Factory Orders Rebound

The Euro saw modest gains this morning, pushing GBP/EUR back from its best level in two weeks following a surprisingly solid German factory orders report.

Forecasts were for the September data to edge higher from -0.6% to 0.1%, but the figure jumped from a revised -0.4% to 1.3% instead.

The high figure failed to offset fears for a recession in the bloc’s powerhouse economy, but bolstered hopes that the German factory sector could finally start to edge away from a year of dire performance.

Markit’s final October services and composite PMIs also beat forecasts slightly, but the Euro’s recovery against the Pound was limited, as optimism around US-China trade relations and the US Dollar (USD) persisted.

Rising hopes for a preliminary deal and an end-in-sight for the long standing US China trade war led to a rise in US Dollar demand yesterday and weakened the rival Euro to the benefit of the Pound.

Pound to Euro (GBP/EUR) Exchange Rate Awaits Further German Data and Trade News

The Pound to Euro exchange rate was able to cling to most of yesterday’s gains despite today’s strong Eurozone data. EUR Investor concern will remain focused on US-China trade hopes, which will continue to boost rival currencies like the US Dollar (USD), and the lingering threat of a German recession.

As a result, the Euro is more likely to find solid support if upcoming German data continues to show signs of recovery.

Thursday’s session will see the publication of Germany’s September industrial production and October construction PMI. Germany’s September trade balance results will then close the week.

If the data prints positively, this would boost hopes of recovery in Germany’s factory and trade sectors to the benefit of the Euro.

However, if the US Dollar (USD) holds onto its strong position, the Euro’s potential for gains will be limited.

Pound to Euro (GBP/EUR) exchange rate investors will also pay close attention to tomorrow’s Bank of England (BoE) policy decision. With the bank already warning against Brexit delays and political uncertainty surrounding the UK election accompanying a raft of weak economic data, bets for a near-term rate cut have increased.

Meanwhile, UK election uncertainty will continue to have a notable influence on the Pound, with fresh political news likely to infuse GBP exchange rates with volatility.