Pound to Euro Exchange Rate Slips Following Days of Strong Election-Focused Gains
While the Pound Sterling to Euro (GBP/EUR) exchange rate has been putting in solid gains this week, the Pound’s (GBP) strength has been largely based in UK election speculation. With some uncertainties persisting, investors are selling the pair from its best levels today.
After opening this week at the interbank level of 1.17, GBP/EUR briefly dipped before recovering and shooting higher. Last night, GBP/EUR touched on its best level in over two and a half years – since May 2017.
While GBP/EUR has slipped slightly from those best levels as the week draws to an end, the pair is still on track to sustain considerable gains of almost a cent this week. GBP/EUR trends high in the region of 1.18 at the time of writing.
With under a week until the 12th of December General Election, there may be days more volatility ahead for the Pound to Euro (GBP/EUR) exchange rate.
Pound (GBP) Exchange Rates Slip as Election Uncertainty Persists
For much of this week, investors have been piling into the Pound (GBP) amid rising bets that Britain’s ruling Conservative Party would win a comfortable majority in next week’s General Election.
If the Conservatives win a majority government, analysts predict they will more smoothly pass their relatively soft Brexit plans into law and prevent a worst-case scenario no-deal Brexit.
As UK polls appeared to steady and show that the Conservatives remained well ahead in the polls, markets piled into bets of a Conservative win ahead of next week’s election. This was the primary cause of Pound’s strong gains this week.
However, investors are hesitant to keep buying the Pound without fresh impetus.
The Pound slipped slightly from its best levels today as investors remained too anxious over the remaining possibility of a hung Parliament to keep buying Sterling higher.
Euro (EUR) Exchange Rates Steady despite Shocking Drop in German Industrial Production
This week’s Eurozone data started out on a positive note, with manufacturing and services PMIs for Germany and the Eurozone bloc beating projections in November results.
However, towards the end of the week, some more notable Eurozone stats fell short of expectations, including employment and retail stats.
This morning’s German industrial production report was particularly concerning though, revealing a shocking contraction of -1.7% in October, rather than the expected rebound to 0.1%.
The data worsened concerns that Germany could still head for recession, dampening Eurozone recovery hopes.
And remember that Oct. industrial turnover was reported flat-ish & is less revision prone. So, the risks of a Q4 GDP contraction have risen after the weak retail & industrial reports, it is too early into the quarter to give up given the usual volatility in German data. 5/5
— Oliver Rakau (@OliverRakau) December 6, 2019
Despite this though, the Euro (EUR) saw decent performance this morning. This was largely due to broad weakness in its biggest rival, the US Dollar (USD).
Pound to Euro (GBP/EUR) Exchange Rate to be Dominated by Election Speculation Next Week
Next week is the week of the 2019 UK General Election, the key event that will finally make clearer what the next steps for the long-drawn Brexit process could be. The election will take place on Thursday the 12th.
Speculation or signs that the ruling Conservatives will win a majority could boost soft Brexit hopes and cause the Pound (GBP) to see strong performance.
On the other hand, fresh signs that Britain could still head for another hung Parliament would cause no-deal Brexit fears to return and the Pound to shed much of its recent gains.
If the result of the Thursday election is shocking, GBP/EUR may be in for significant movement over the coming two weeks.
As a result of the election focus, the Pound is unlikely to react much to upcoming UK ecostats. Typically key data like growth and trade figures will be published on Tuesday but will likely be overshadowed by the election.
The Euro (EUR) is likely to be driven by strength in rivals like the Pound and US Dollar (USD).
Upcoming Eurozone news, such as production data, German inflation and the European Central Bank’s (ECB) December policy decision, could also influence the Pound to Euro (GBP/EUR) exchange rate next week.