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Pound Sterling Euro (GBP/EUR) Exchange Rate Volatile as Investors Await Key Eurozone Data

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Pound to Euro Exchange Rate Struggles for Direction after Mixed UK Election Predictions

Demand for the Pound to Euro (GBP/EUR) exchange rate has become more mixed and volatile over the past week, as investors react to fresh political uncertainty in Britain and ongoing economic jitters in the Eurozone.

After opening last week at the level of 1.1576, GBP/EUR spent most of the week trending with an upside bias, but gains were limited and the pair also saw wide fluctuations.

On Friday before markets closed, GBP/EUR touched on a high of 1.1627 before sliding lower and closing the week at 1.1585. This meant that GBP/EUR ultimately edged higher last week.

The Pound to Euro exchange rate remained volatile when markets opened today, and at the time of writing the pairing was fluctuating fairly close to the week’s opening levels.

Pound (GBP) Exchange Rates Mixed as Investors Await Political News

Last week was a highly eventful one for the Pound, as the EU confirmed that Brexit would be delayed until the 31st of January, while UK parliament confirmed that there would be a general election on the 12th of December.

With just over a month now until the election, Britain’s political parties have set to campaigning. Polls are volatile, but most early predictions are for a Conservative party majority.

A Tory win would help Prime Minister Boris Johnson push through his Brexit plan and so the polling news has been to the benefit of the Pound. But election uncertainties persist, and are keeping investors from buying Sterling too much.

Britain’s economic outlook is weighing further on the British currency. Last week’s UK manufacturing PMI from Markit beat forecasts, but analysts remain concerned that the sector was heading for recession, amid expectations for protracted Brexit uncertainty.

According to Duncan Brock, Group Director at the Chartered Institute of Procurement & Supply:

‘Business was still restrained by the Brexit leash, as firms were subjected to the struggle against client indecision and also the downpull of a slowing global economy’

Forecast-Beating PMIs Offer Euro (EUR) Exchange Rates Modest Support

The Pound to Euro (GBP/EUR) exchange rate was trending a little higher this morning, until the Euro found fresh support on the latest Eurozone PMI results from Markit.

The final October manufacturing PMIs beat forecasts in major Eurozone nations, including France and Germany, boosting Eurozone manufacturing overall to a contraction of 45.9 rather than the projected 45.7.

German manufacturing still printed a highly concerning contraction of 42.1, but this was still better than the predicted 41.9.

On the other hand, the data confirmed that Germany’s manufacturing sector remains in recession.

Phil Smith, Principal Economist at IHS Markit, said Germany’s factory sector had seen its worst performance since the financial crisis, but noted that the latest data also showed some optimistic signs:

‘The survey’s more forward-looking indicators offer some glimmers of hope. Latest data for new orders and output expectations were still very weak in October, but nevertheless the best seen in four months.’

Pound to Euro (GBP/EUR) Investors Await Data and UK Political News

Investors are hesitant to move much on the Pound, amid uncertainty over how Britain’s polls will shift in the month-long lead-up to December’s general election.

This means that unless tomorrow’s upcoming UK services PMI data surprises investors, the Pound’s movement will likely remain volatile as markets await domestic political and Brexit news.

The Euro, on the other hand, is more likely to continue to be driven by economic data.

Today’s Eurozone manufacturing PMIs were a little less dire than expected, so if Wednesday’s Eurozone services and composite PMIs also beat forecasts they could further boost Euro support.

Other Eurozone data this week could give investors a better idea of how the German factory sector has been performing.

German factory orders on Wednesday, and industrial production on Thursday may also have an impact on the Pound to Euro (GBP/EUR) exchange rate outlook if they surprise.