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UK Pre-Christmas Election Leaves Euro Pound (EUR/GBP) Exchange Rate Muted

Euro Pound (EUR/GBP) Exchange Rate Flat as Markets Assess Early Election Risks

The Euro Pound Sterling (EUR/GBP) exchange rate was left muted today, and the pairing is currently trading at around £0.8640.

Earlier in the week, the Pound was supported by hopes the country will avoid crashing out of the European Union without a deal after the bloc granted the UK a ‘flextension’ to 31 January.

Meanwhile, Sterling was left flat against the Euro on Wednesday after Prime Minister Boris Johnson won the approval of MPs to hold a general election.

It has been argued that a December general election will break the current Brexit deadlock that haunted parliament in the run-up to the previous Halloween Brexit deadline.

However, the British currency has remained flat as markets assessed the risk associated with an early election, although many investors suspect the Conservative Party will remain power.

Commenting on this, MUFG’s European head of global research, Derek Halpenny said:

‘Johnson has cross-party support and [the opposition] Labour Party has lost a fair lot of the credibility it had in the 2017 election.

‘So that’s reflected in the stability in Sterling – markets believe the Conservative party will hold on to power and have a Brexit deal agreed with the EU.’

Euro (EUR) Muted as German Inflation Left Unchanged in October

The single currency was left flat against the Pound as Germany’s annual inflation was left unchanged in October after falling for three months in a row.

The Eurozone’s largest economy saw its consumer prices (harmonised to make them comparable with inflation from other EU countries) rise by an annual rate of 0.9%.

Inflation remained at its lowest rate since November 2016, and this marked the fifth month that inflation remained far below the European Central Bank’s (ECB) target.

Meanwhile, this morning the Euro was left under pressure as the German unemployment rate unexpectedly increased in October.

However, the jobless rate was left unchanged at 5%, just higher than the record-low 4.9% reached earlier this year.

Commenting on this morning’s unemployment data, head of Germany’s Labour Office, Detlef Scheele noted:

‘The recent economic weakness is leaving its marks on the job market. But all in all, it still proves to be robust.’

Euro Pound Outlook: Will Weak Eurozone Growth Weigh on EUR?

Looking ahead to Thursday, the Euro (EUR) is likely to fall against a handful of currencies following the release of the bloc’s flash Q3 GDP data.

If the Eurozone’s economy does not expand as much as forecast, it could leave the single currency under pressure.

Added to this, the Euro could extend its losses against Sterling (GBP) following the release of the bloc’s preliminary inflation data.

If inflation continues to remain far below the European Central Bank’s (ECB) target, it is likely the Euro Pound (EUR/GBP) exchange rate will slide.