Euro to Pound Exchange Rate Continues to Climb despite EU Election Jitters
Despite a lack of fresh demand for the Euro (EUR) today, the Euro to Pound Sterling (EUR/GBP) exchange rate resumed its advance today thanks to continued broad weakness in the Brexit battered Pound (GBP).
While gains have been more muted than last week’s surge from 0.8642 to 0.8787, EUR/GBP has recovered from the modest losses seen earlier in the week.
At the time of writing on Wednesday, EUR/GBP was trending closely to its best levels in three months. The current high of 0.8818 was the best level for EUR/GBP since mid-February.
Demand for the Euro has been supported by hopes that the Eurozone economy is seeing resilient performance this year so far, but the biggest cause of Euro to Pound exchange rate gains today was UK political and economic fears.
Euro (EUR) Exchange Rates Limp with Political Uncertainties and Rival Strength in Focus
Amid a lack of fresh notable news influencing the Euro’s movement today, the shared currency continues to be driven by the strength of rival currencies, as well recent economic and political news.
The primary cause of EUR/GBP gains today was Pound weakness. As the US Dollar (USD) is the Euro’s biggest currency rival, recent mixed US Dollar movement has also supported the shared currency.
In terms of economic news, investors remain hopeful that the Eurozone economy is showing resilience. Yesterday’s Eurozone consumer confidence projection from May beat expectations, only contracting at -6.5 rather than the predicted -7.7.
However, demand for the Euro is also limited ahead of tomorrow’s EU elections, which some analysts fear could lead to a rise in support for Eurosceptic parties across the EU.
Pound (GBP) Exchange Rates Slump on Political and Economic Fears
There isn’t much to be bullish about in the Pound outlook, as UK political concerns continue to rise, while the economic outlook becomes even cloudier.
Prime Minister Theresa May’s attempt to propose a new Brexit deal was met with criticism from both allies and opponents, leaving little hope that her plan will be passed before her leadership comes to an end.
Hopes for a soft Brexit have faded, being replaced by renewed fear of a no-deal Brexit as markets bet a hard Brexit supporter will succeed Theresa May, and the populist Brexit Party is expected to perform strongly in tomorrow’s EU elections.
Today’s economic news has only further dampened the Pound’s appeal and added to today’s selloff. UK inflation fell short of expectations, and investors were also anxious to hear that British Steel had fallen into liquidation.
According to Mike Cherry, National Chairman at the Federation of Small Businesses:
‘The closure will have a huge knock on impact across the communities surrounding the company’s plants. A raft of small firms like caterers, cafes, cleaners, shops and visitor attractions, all of which employs their own staff, rely heavily on British Steel.’
Euro to Pound Exchange Rate Investors Anticipate EU Elections and Eurozone Data
Thursday is likely to be the most influential session this week for the Euro to Pound (EUR/GBP) exchange rate, as EU elections will be held across the European Union, and a slew of influential Eurozone ecostats will be published.
Pound investors are highly anxious about the EU elections, as the new populist Brexit Party is expected to perform well in the UK and the Conservative Party is expected to shed significant support.
If the ruling Conservative Party does even worse than expected, hard Brexit fears could worsen and lead to further Pound losses.
Still, the results of the EU elections and how well Eurosceptic parties have performed may not be fully known until the end of the weekend.
As a result, EUR/GBP is more likely to be influenced by key Eurozone data tomorrow.
Markit’s Eurozone PMI projections for May, as well as German growth and business confidence data, could be highly influential for the Euro to Pound (EUR/GBP) exchange rate if they surprise investors.