GBP/EUR Exchange Rate Soars Following Critical Opinion Poll
The Pound to Euro (GBP/EUR) exchange rate is consolidating its gains this morning, having skyrocketed in the mid-week on the back of polling data showing the Conservatives winning a large majority in next month’s election.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1741, just short of the six-month high struck overnight.
Pound (GBP) Surges as MRP Poll Points to Tory Majority
The Pound (GBP) roared higher on Wednesday evening as GBP investors welcomed a poll which suggested the Conservatives are on track to make huge gains in the upcoming election.
YouGov’s published its multilevel regression and post-stratification (MRP) poll yesterday evening in which it predicted Boris Johnson will win 359 seats for a majority of 68.
— YouGov (@YouGov) November 27, 2019
The MRP poll is seen as highly influential as it uses a model which tries to work out which party would win in each constituency and was the first to correctly predict that Theresa May would lose her majority in the 2017 election.
The poll elicited cheers from GBP investors who hope that a majority for the Tories will allow Johnson to push his Brexit deal through parliament as well as enact more business-friendly policies.
However analysts warn about reading too much into a single poll, especially in the post-Brexit landscape where political norms have been tossed out of the window.
Euro (ECB) Steady as Eurozone Economic Sentiment Improves
Meanwhile, the Euro (EUR) is holding its ground this morning after the Eurozone’s latest economic sentiment indicator showed a slightly stronger-than-expected rise in sentiment.
According to data published by the European Commission (EC), the bloc’s economic sentiment index rose from 100.8 to 101.3 in October, beating an expected rise to 101.
The EC attributed the rise to manufacturing optimism amidst a rise in production expectations and stock levels.
GBP/EUR Exchange Rate Forecast: Weak Eurozone Inflation to Drag on the Euro?
Looking ahead, the Pound to Euro (GBP/EUR) exchange rate may close the week even higher as the Eurozone publishes its Consumer Price Index (CPI).
This is expected to show that inflation in the bloc rebounded from a three-year low this month, but also that it remained below 1%.
Stubbornly low inflation continues to be a major headache for the European Central Bank (ECB), which targets a 2% inflation rate.
As a result the continued weakness in CPI is likely to stoke fears amongst EUR investors that the ECB will need to implement additional monetary easing in 2020.
Meanwhile in the UK the focus will remain entirely on the upcoming election. With two weeks to go GBP investors will be well aware that anything could happen and as such will remain highly sensitive to any polls released between now and then.