GBP/EUR Exchange Rate Rangebound, Will December Election Break Brexit Deadlock?
The Pound Euro (GBP/EUR) exchange rate held steady this morning, with the pairing currently trading around €1.158 after Prime Minister Boris Johnson won his fourth bid for a pre-Christmas general election. With a majority of 438 to 20, could the Brexit deadlock finally be broken?
UK markets today remain cautious, with risks and uncertainty surrounding the December election meaning that Brexit will effectively be on hold for over 5 weeks.
Paula Surridge, a Political Sociologist at the University of Bristol, commented:
‘Who manages to hold on to the larger part of the 2017 votes is likely to form the next government. Will this be the Brexit election 2017 never quite managed to be? The Liberal Democrats and the Brexit party will be pushing hard to make it so, while Labour are likely to want to talk about almost anything else.’
The GBP/EUR exchange rate will likely remain subdued today as markets consider the December general election odds. With both Labour and the Conservatives breaking next Wednesday to embark on a short five week campaign trail, the outcome remains unpredictable at this stage.
In UK economic data, today saw the release of September’s UK BRC shop price index, which eased by -0.4%.
Helen Dickinson, Chief Executive at BRC, said:
‘Consumers continue to benefit from lower shop prices, with October being the fifth consecutive month of decline. Non-food prices have fallen well below the 12-month average, with greater discounting taking place as retailers seek to stimulate additional sales.’
EUR/GBP Exchange Rate Flat, French Growth Figure Beats Expectation in Third Quarter
The Euro (EUR) failed to gain on the Pound (GBP) despite the French growth figure for the third quarter, which beat expectations and rose by 0.3%.
Francois Cabau, an Economist at Barclays, commented that the preliminary French GDP growth reading had buoyed his ‘cautiously optimistic view on France’. He added:
‘We continue to think that the domestic fundamentals are well oriented and, in particular, private consumption should do well.’
The Euro’s potential gains were clipped by an accelerating German unemployment rate for October, with the unemployment change figure increasing by 6,000 this month.
Detlef Scheele, the Head of the German Labour Office, was upbeat:
‘We continue to think that the domestic fundamentals are well oriented and, in particular, private consumption should do well.’
We could see the EUR/GBP exchange rate fall later on today if German inflation data drops below forecasts for October.
GBP/EUR Outlook: UK Political News to Remain in Focus
Pound traders will be looking ahead to tomorrow’s UK GfK consumer confidence index for October, which is expected to ease from -12 to -13.
Meanwhile, EUR investors will be awaiting tomorrow’s publication of the Eurozone’s preliminary growth figure for the third quarter, which is expected to ease from 0.2% to 0.1% quarterly, while the year-on-year figure is expected to fall from 1.2% to 1.1%.
UK political news will continue to provide Pound movement this week, with a focus on Prime Minister’s Questions as Labour and Conservative differences are battled out and the two parties reveal their campaign messages ahead of the December election.
