Pound Sterling Euro (GBP/EUR) Exchange Rate Slides as Johnson Secures Tory Majority
The Pound Sterling Euro (GBP/EUR) exchange rate slumped this morning after results revealed the Conservatives secured a large majority. The pairing is currently trading at around €1.1962.
While the Pound dropped back this morning, last night’s exit poll saw the pairing surge to its highest level since July 2016.
Sterling rose as markets were convinced the Conservative majority would mean the current Brexit deadline will be tackled.
Boris Johnson’s Conservatives have gained enough seats to give them a clear majority, with the victory being the biggest since the 1980s.
Commenting on this, CMC Markets’ chief market strategist, Michael McCarthy said:
‘We’ve already seen a strong reaction in the Pound from the exit poll.
‘We also see a rise in stock futures in reaction to two very important pieces of news for markets. This should support global growth.’
Bundesbank: Germany to Face Another Sluggish Year
The single currency edged up against the Pound on Friday despite reports revealing the German economy is likely to face yet another sluggish year.
In its growth forecasts, Germany’s central bank said that despite predictions of a rise in exports, households could see their spending power shrink.
Bundesbank halved its growth forecasts in its biannual report, with real GDP growth predicted to rise by 0.6%.
In a statement, the bank noted:
‘Growth in domestic demand will probably not be as dynamic as it was during the boom period of previous years.
‘This is due mainly to households’ real disposable income, which fell primarily on the back of significant slowdown in employment growth.
‘For economic growth and, to a lesser extent, for the rate of inflation, the risks are tilted to the downside as things stand today.’
Euro (EUR) Rises as ECB Leaves Rates on Hold
Meanwhile, on Thursday the single currency was provided with a slight upswing of support as the European Central Bank (ECB) left rates unchanged.
During ECB chief, Christine Lagarde’s first meeting, the bank left the door open for further stimulus as the bloc continues to suffer from weak global growth.
In a press conference following the decision, Lagarde noted that the current risks to the Eurozone were less severe than previously thought.
Commenting on the press conference, Aberdeen Standard Investments’ senior economist, Paul Diggle said:
‘She gave a slightly more upbeat assessment of the growth and inflation outlook; sounded slightly more cautious about the negative consequences of negative rates; stepped up the lobbying of governments to loosen fiscal policy; and gave a sneak-peak of the topics the ECB strategic review will cover.’
Pound Euro Outlook: Will Weak German PMIs Weigh on EUR?
Looking ahead to the start of next week, the Euro (EUR) could slide against the Pound (GBP) following the release of Germany’s PMI data.
If December’s flash German manufacturing PMI slides further into contraction, showing the manufacturing downturn continues, single currency sentiment will fall.
Meanwhile, Brexit optimism and flash UK PMIs could provide Sterling with a slight upswing of support.
If the UK’s manufacturing PMI edges out of contraction territory in December, the Pound Euro (GBP/EUR) exchange rate is likely to rise.