Euro to Pound Exchange Rate Dips as UK Election Hopes Continue to Support Sterling
Despite decent Eurozone data lately, the Euro to Pound Sterling (EUR/GBP) exchange rate struggled to keep trending with an upside bias today. Instead, the pair dipped to fresh major lows.
Following last week’s tumble from 0.8588 to 0.8519 on the back of rising bets of a Conservative majority in the upcoming UK election, this week has seen more mixed movement from EUR/GBP so far.
EUR/GBP attempted to advance on Monday, but quickly shed those gains and this morning was trending near its worst levels since May 2017 – 0.8499.
Market demand for the Euro was not helped by the latest Eurozone services PMI data, which fell short of expectations in some key prints. Sterling meanwhile is being supported by speculation about next week’s General Election.
Euro (EUR) Exchange Rates Lack Drive as Eurozone Services PMI Bucks Positive Trend
Most of the key Eurozone data in recent weeks has started to show signs that the bloc’s economy is finally showing signs of recovery following months and months of slowdown.
This was also true of last week’s Eurozone inflation results and this week’s Eurozone manufacturing PMIs from Markit, which beat forecasts.
However, there are still notable signs of lingering weakness in Eurozone economic activity and this is keeping investors from buying the shared currency too much.
This morning, Markit’s final November services and composite stats for the Eurozone were published. While German services beat forecasts, French figures missed the mark.
While the Eurozone stats were overall better than forecast, the slip in French services meant investors were hesitant to buy the Euro.
This mixed data, combined with concerns that a more protectionist US trade stance could lead to further months of slowdown, left the Euro without much support against a volatile Pound (GBP) today.
Pound (GBP) Exchange Rates Supported as Investors Bet on Conservative Majority
Demand for the Pound has been strengthening on political developments and hopes lately, as markets speculate that the upcoming UK General Election will make a worst-case scenario no-deal Brexit less likely.
Last week, investors piled into the Pound as a major poll showed the ruling Conservative Party winning a comfortable majority in the 12th of December Election.
This week’s movement has been a little more mixed in comparison, as some polls continued to indicate that Britain’s opposition Labour Party was closing the gap on the ruling Conservatives.
Overall though, markets predict that a Conservative majority is still fairly likely. As it is expected to help the Conservatives to push through a relatively soft Brexit plan, this is seen as a Pound-positive outcome.
According to Ned Rumpeltin, European Head of Currency Strategy at Toronto-Dominion Bank:
‘With just over a week to go, Sterling remains highly influenced by the polls day-to-day, but we may also be seeing some relief that Trump did not toss a grenade into the UK political system during his remarks,’
Euro to Pound (EUR/GBP) Exchange Rate Investors Await Thursday’s Slew of Eurozone Data
While the Pound has been the primary cause of Euro to Pound (EUR/GBP) exchange rate movement so far this week, Euro investors are also likely hesitant to move much on the shared currency ahead of major Eurozone data due for publication tomorrow.
Thursday’s European session will see the publication of the Eurozone’s latest Q3 Gross Domestic Product (GDP) growth rate projections, which could be hugely influential if they surprise investors.
Eurozone employment change and retail sales data, as well as German factory orders, will also be published and could cause a shift in Euro stances depending on the results.
Stronger Eurozone data would make investors more hopeful that the Eurozone economic outlook is recovering, and this would help EUR/GBP to recover some of this week’s losses.
The Pound, on the other hand, will remain focused on UK election speculation and polling. With just over a week until the 2019 General Election, the Euro to Pound (EUR/GBP) exchange rate’s movement could be in for continued volatility over the next week.