GBP/EUR Exchange Rate Flying High on Tory Election Optimism
The Pound to Euro (GBP/EUR) exchange rate is currently trading at its best levels since May 2017 as traders raise their bets that the Conservatives will win a landslide victory next week.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1851, building on yesterday’s gains.
Pound (GBP) Rallies as Fears of a Hung Parliament Fade
The Pound (GBP) continues to strengthen this morning amidst rising expectations that Boris Johnson will secure a convincing majority when UK voters go to the polls next week.
The British pound reaches its highest in months on optimism the Conservatives will carry the coming election https://t.co/HhkrxwSPmf
— Bloomberg UK (@BloombergUK) December 4, 2019
Sterling skyrocketed on Wednesday, breaking through key resistance levels against many of its peers, including the Euro (EUR), with the GBP/EUR exchange rate breaching €1.18 for the first time in over two years.
The Pound’s rise comes on the back of opinion polls which show that the Tories continue to enjoy a double digit lead over Labour, a large enough margin to suggest that the UK will avoid a hung parliament.
GBP investors are generally in favour of a Tory victory in next week’s election, on hopes that a majority will allow Johnson to pass his EU withdrawal bill and avoid the prospect of a no-deal Brexit in January.
Michael Hewson, Chief Market Analyst at CMC Markets, comments:
‘Having been so negative on the pound for so long, markets are starting to believe in the prospect that we could well start to see the prospect of an orderly withdrawal from the EU in the next two months, and thus short positions are starting to get squeezed out, sending the currency to its best levels against the euro since before the 2017 election.’
Of course a lot could happen between now and the election, and a lot will be riding on whether not the Tories can cross the finish line without jeopardising their lead with the gaffes that the party has so often run afoul of.
Euro (ECB) Undermined by Weak German Industrial Data
The Euro (EUR) is struggling to hold its ground against the Pound (GBP) this morning, particularly in light of another piece of gloomy piece of German economic data.
According to data published by Destatis, German factory orders unexpectedly contracted in October, slumping from an upwardly revised 1.5% to -0.4%, missing expectations for a modest 0.3% expansion.
Carsten Brzeski, chief economist at ING, notes that Germany industrial orders are currently on track to fall in 2019, with an average monthly contraction of 0.6%.
Persistently weak German industrial data has been a source of considerable pain for the Euro in recent months, as it brings Europe’s largest economy to a standstill.
GBP/EUR Exchange Rate Forecast: How Much Further Can Sterling Climb?
Looking ahead, the question on everybody’s lips will be how much higher can the Pound to Euro (GBP/EUR) exchange rate climb ahead of next week’s election.
On its current trajectory €1.19 certainty isn’t out of the question, but could we see the pairing even text €1.20?
Much will depend on whether the Conservative are able to keep everything together over the next 7 days.
Meanwhile, the Euro may contribute to further gains in GBP/EUR at the end of the week if Germany industrial production is also show to have underperformed in October.