Pound to Euro Exchange Rate Remains Unappealing Following Last Week’s Slip
Despite the Euro’s (EUR) movement being limited due to mixed Eurozone data, the Pound Sterling to Euro (GBP/EUR) exchange rate has been unable to hold its ground due to concerns on UK politics.
GBP/EUR movement was mixed last week, as political and economic uncertainties weighed on both currencies.
GBP/EUR opened last week at around 1.1225 and briefly touched on a post-January low of 1.1149 before rebounding slightly, though its recovery was limited and the pair was only able to close the week at around the level of 1.1187.
Since markets opened this morning, GBP/EUR rebounded again though was only trending near the level of 1.1185 at the time of writing.
With European Central Bank (ECB) interest rate cut bets in focus this week, investors are anticipating upcoming Eurozone inflation stats.
Pound (GBP) Exchange Rates Unappealing on Fresh Political Controversy
Last week saw the initial voting stages of the Conservative Party leadership contest come to an end, as MPs voted for frontrunner Boris Johnson and runner-up Jeremy Hunt to be the two MPs to face a party membership vote.
Johnson, a prominent member of the Brexit referendum Leave Campaign in 2016, has been the clear favourite to win and analysts widely expect that he will be Prime Minister once membership voting concludes in late July.
However, over the weekend a fresh controversy emerged over the frontrunner. Reports that the police had been called on a heated row between Johnson and his partner caused concerns about Johnson’s credentials.
This caused market uncertainty to rise, which dampened demand for the Pound (GBP).
Recent UK data has been relatively low-influence, and last week’s slightly less hawkish than expected tone from the Bank of England (BoE) has also limited market appetite for Sterling.
Euro (EUR) Exchange Rate Demand Limited as Eurozone Data Mixed
The Pound continues to face pressure from Brexit jitters causing domestic political and economic uncertainties, but the Euro has struggled to capitalise on the weakness of its rival due to mixed Eurozone news.
While the Euro was supported at the end of last week by signs that the Eurozone’s economic activity was recovering, as well as weakness in its rival the US Dollar (USD), the shared currency has also been weighed by European Central Bank (ECB) speculation.
ECB President Mario Draghi took a more dovish stance on Eurozone monetary policy last week, warning that the bank may need to make dovish moves if the Eurozone’s price pressures do not improve.
This has left investors highly anticipating upcoming Eurozone inflation data.
This morning’s German business confidence data from Ifo had little notable influence on the Euro, The current conditions and business climate stats beat forecasts, but the expectations figure was a little weaker than expected.
Pound to Euro (GBP/EUR) Exchange Rate to be driven by Political and Central Bank News
Since last week’s surge in European Central Bank (ECB) easing speculation, Euro investors have been more focused on ECB interest rate cut bets as well as upcoming Eurozone data that could influence ECB bets.
As a result, investors are highly anticipating German inflation data due on Thursday and the Eurozone’s overall inflation projection on Friday.
With this week’s most influential Eurozone data not due until the second half of the week though, the Pound to Euro (GBP/EUR) exchange rate may be driven more by UK political developments in the first half of the week.
Any developments regarding the row over leadership frontrunner Boris Johnson could influence domestic political uncertainty and impact the Pound’s appeal.
Failing any notable shift in UK politics though, the Pound to Euro (GBP/EUR) exchange rate will focus on Eurozone data. Tomorrow’s French business confidence and Wednesday’s German and French consumer confidence data may also prove influential.