Euro to Pound to Exchange Rate Slips in Reaction to Weekend UK Polls
Following fairly solid gains last week in reaction to UK political uncertainties and weak UK data, the Euro to Pound Sterling (EUR/GBP) exchange rate has slipped again since markets opened this week.
Last week EUR/GBP gains were ultimately fairly modest, with the pair climbing from the level of 0.8566 to 0.8588. On Friday, EUR/GBP touched on a weekly high of 0.8603 before markets closed for the week.
Since markets opened today though, EUR/GBP has been trending lower again. This is due to the weekend’s latest UK election polls pushing the Pound (GBP) higher.
At the time of writing, EUR/GBP was trending close to the level of 0.8567 – just above last week’s opening levels.
Euro (EUR) Exchange Rates Sink Lower as German Confidence Stats Fail to Impress
Following last week’s stronger than expected German and Eurozone manufacturing PMI data, investors had been hoping that this week’s data would continue to point towards signs of recovery in German economic activity and the Eurozone economy.
As a result, investors were relatively disappointed by this morning’s German business confidence stats from November.
The report, published by Ifo, showed that business climate and current conditions met forecasts, but expectations were a little weaker than expected.
German business expectations were expected to improve from 91.5 to 92.5, but only climbed to 92.1.
The data left the Euro (EUR) more vulnerable against the Pound, leading to further losses this morning.
Pound (GBP) Exchange Rates Supported by Latest UK Election Speculation
When markets opened this morning, the Pound saw a rise in demand as investors digested the weekend’s UK political developments.
Not only did Prime Minister Boris Johnson pledge that he would bring his Brexit deal back to Parliament before Christmas if he won next month’s election, but the latest polls showed an increased lead for Johnson’s Conservative Party.
The ruling Conservative Party is currently seen by markets as the best chance of a relatively soft Brexit plan becoming reality.
Weekend polls showed the party extending its lead against the opposition Labour Party, despite last week’s televised debate being seen as a close match between Johnson and Labour Leader Jeremy Corbyn.
Stephen Jen, Founder and Co-Chief Investment Officer at Eurizon SLJ Capital, said about the Pound:
‘We’re in the very early part of a sustained rally,
The general election has a good chance of delivering a healthy majority for the Conservative party.’
Euro to Pound (EUR/GBP) Exchange Rate Anticipates Further German and Eurozone Data
Demand for the Euro (EUR) is a little weaker today as the latest German data fails to impress investors, but German and Eurozone data due in the coming days could still offer the shared currency some support if it impresses.
Germany’s December consumer confidence data from GfK will be published tomorrow, with French consumer confidence due on Wednesday.
Even more influential data will come in towards the end of the week though. Eurozone confidence and German inflation data is due on Thursday, followed by German retail and unemployment and Eurozone inflation on Friday.
If Eurozone data beats forecasts, it could boost hopes that the bloc is recovering from months of slowdown and the Euro will see stronger demand.
Due to the number of key Eurozone stats on the way and the Pound’s focus on politics, EUR/GBP is unlikely to be driven much by UK data this week.
Investors will be looking for further signs that Britain’s ruling Conservative Party could win next month’s UK General Election, but unless there are political developments the Euro to Pound (EUR/GBP) exchange rate will be driven by Eurozone data.