Pound to Euro Exchange Rate Struggles to Hold Two and a Half Year Best Levels
After seeing strong advances in recent weeks, the Pound’s (GBP) rally on UK election hopes appears to have slowed for now as the Pound Sterling to Euro (GBP/EUR) exchange rate quickly steadied after touching on fresh highs yesterday.
Last week saw a solid GBP/EUR advance of over a cent, from the interbank level of 1.17 to 1.18.
While GBP/EUR hasn’t moved much since markets opened this week, the pair briefly tested a high of 1.19 yesterday, which was the best interbank rate since April 2017.
GBP/EUR continues to trend in the region of 1.18 at the time of writing on Tuesday, but the pair has slipped slightly below the week’s opening levels as investors contemplate the potential political uncertainties that lie ahead of Thursday’s anticipated UK General Election.
Pound (GBP) Exchange Rates Struggle to Hold Best Levels amid Political Uncertainties
Bets that Britain’s 12th of December General Election would end with a comfortable majority for the ruling Conservative Party have been the primary cause of the Pound’s (GBP) strong performance over the past week
If the Conservative Party wins a majority it will be able to more easily push its relatively soft Brexit plans through UK Parliament and prevent a no-deal Brexit – at least, that’s what markets had been betting.
As the election approaches, there are still signs that the results could be unexpected. On top of this, analysts are warning that even in the event of a Conservative Party win, the Pound could quickly tumble again as the uncertainty of Brexit negotiations returns.
There is concern among some investors that the government may not be able to complete then next phase of negotiations quickly enough, which could still potentially end in a no-deal Brexit if the government wants to avoid an extension to the transition period.
This uncertainty is keeping the Pound from holding its best levels today.
Euro (EUR) Exchange Rates Steady on Hopes of Eurozone Economic Recovery
The Euro (EUR) was one of the market’s more appealing major currencies at the beginning of the week, as GBP/EUR struggled more than other Pound (GBP) exchange rates to post fresh gains.
While last week’s Eurozone data was mixed, showing poor German factory results from October, this week’s data has been optimistic so far and has boosted hopes that the Eurozone economic outlook is slowly recovering.
Monday saw the publication of Germany’s October trade balance results, which showed stronger than expected exports. This morning’s October industrial production figures from France were also twice as strong as expected, at 0.4%.
Overall though, amid last week’s mixed data and this week’s decent data, the Euro is simply steadying in anticipation of more influential ecostats and European Central Bank (ECB) news later in the week.
The Euro is also benefitting from recent weakness in its biggest rival, the US Dollar (USD).
Pound to Euro (GBP/EUR) Exchange Rate Eagerly Awaits Election and European Central Bank (ECB)
Some fairly notable Eurozone ecostats are due for publication today, but Euro (EUR) investors may overlook these results in anticipation of a major session expected on Thursday.
Thursday will see not only the European Central Bank’s (ECB) December policy decision, but also Britain’s highly anticipated 2019 General Election.
The ECB decision will be the first held by new ECB President Christine Lagarde. If the bank takes a less dovish stance than expected as a result of the recent signs of recovery in Eurozone data, the Euro could see a rise in demand.
However, Britain’s election will of course be the biggest market event of the week.
Over the next day or so, investors will look to steady and adjust positions on the Pound (GBP) ahead of Thursday’s election, and the result of the election itself will have a huge impact on the Pound outlook.
If the UK election leads to a Conservative majority, the Pound could see a jump in demand. On the other hand, a hung Parliament could lead to a plunging Pound to Euro (GBP/EUR) exchange rate.