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The GBP/EUR Exchange Rate Climbs as UK Government Appears to be Stabilising

Stability of UK Government Supports Uptick in GBP/EUR

The Pound Euro (GBP/EUR) exchange rate is trending higher this morning as markets appear more optimistic towards Theresa May’s leadership of the Conservative party.

At the time of writing GBP/EUR is up by around 0.2%, with the pairing having recovered around half a cent from the lows struck on Wednesday.

Sterling’s (GBP) Strengthen

Political uncertainty in the UK has been a major drag on the Pound in recent months, with a report emerging nearly every other week of a split in the Conservative party a possible leadership challenge against the PM.

However these concerns appear to be fading in the wake of recent polling data which suggests that Labour and the Tories are now neck and neck after a 10 point led for Labour at the end of last year.

Analysts at Royal Bank of Canada (RBC) suggest this is having a positive impact on Sterling sentiment as it suggests the PM may be in a stronger position than pervious thought.

Adam Cole. Head of FX strategy at RBC Capital Markets said;

‘We note that prediction markets now have Labour and the Conservatives neck-and-neck as likely to be the largest party after the next election.

The probability of this government serving its full five years has also risen to a new high.’

Euro (EUR) Bolstered by French Employment Figures

At the same time the Euro remains in a strong position this morning thanks to the release of France’s latest labour statistics.

Data published by France’s statistics office, INSEE, revealed that unemployment fell from 9.6% to 8.9% in the fourth quarter, its lowest levels since 2009 and beating expectations that unemployment would remain unchanged.

The drop will be welcome news to President Emmanuel Macron as it suggests that his controversial labour reforms implemented in September have been highly effective.

GBP/EUR Forecast: UK Retail Sales to Rebound?

Looking ahead the GBP/EUR exchange rate may continue to rally at the end of this week’s session with the publication of the UK’s latest retail sales figures.

Economists forecast that retail sales will have rebounded from -1.5% to 0.5% in January, with the uptick likely to bolster hopes of a rate hike from the Bank of England (BoE) later this year.

Meanwhile the Euro could find some strength tomorrow as analysts predict that German wholesale prices will have risen in January.