Pound to Euro Exchange Rate Remains Appealing Following Last Week’s UK Election
Investors have been adjusting positions since last week’s UK General Election led to a strong performance for the ruling Conservative Party, and sent the Pound Sterling to Euro (GBP/EUR) exchange rate briefly soaring.
After opening last week at the interbank level of 1.18, GBP/EUR lowered into the region of 1.17 in anticipation of the election results before surging to 1.20 when the results began to come in.
While GBP/EUR has been unable to hold Thursday night’s high, the best level for the pair since late-2016, it tested levels around the key region of 1.20 again this morning as investors continued to adjust to last week’s news.
The Pound (GBP) remains appealing on hopes that the next steps in the Brexit process will go smoothly, while the Euro (EUR) is awaiting signs of recovery in the Eurozone economic outlook.
Pound (GBP) Exchange Rates Boosted by Brexit Hopes as Election Chaos Fades
The Pound (GBP) rocketed on Thursday, when the first exit polls of the UK General Election showed a strong majority for the ruling Conservative Party.
As the results came in and largely confirmed the accuracy of the exit polls, investors spent the night and Friday’s session digesting the outcome.
A Conservative majority is expected to make is much easier for UK Prime Minister Boris Johnson to push his Brexit plan through Parliament and enter the next phase of Brexit talks.
2020’s next phase of Brexit negotiations are now expected to take focus for Pound investors. According to Audrey Childe-Freeman and Tim Craighead, Strategists from Bloomberg Intelligence:
‘With the Tories’ decisive victory, UK markets should quickly shift focus to the coming trade negotiations and spending priorities,
Sterling has room to keep running.’
Euro (EUR) Exchange Rates Pressured as Eurozone Manufacturing Buckles Again
The Euro (EUR) spent much of last week as one of the week’s best-performing major currencies, holding its ground better against a strong Pound (GBP) than many other currencies did.
This was due to hopes that the Eurozone economic outlook was improving, amid further signs of recovery in recent Eurozone data.
However, this week’s Eurozone data has gotten off to a less promising start. The bloc’s PMI projections for December were expected to show that manufacturing would remain near November’s levels, but instead fell short of expectations.
French manufacturing fell to a near-stagnant 50.3, while German manufacturing contracted deeper than expected at 43.4. Overall, the Eurozone’s manufacturing sector contracted at 45.9 rather than recovering to 47.3 as forecast.
While the Eurozone’s services sector showed more signs of resilience, the poor manufacturing data weighed on market hopes for a broader recovery. According to Chris Williamson, Chief Business Economist at IHS Markit:
‘There are scant signs of any imminent improvement. New order growth remains largely stalled and job creation has almost ground to a halt, down to its lowest for over five years as companies seek to reduce overheads in the weak trading environment and uncertain outlook.’
Pound to Euro (GBP/EUR) Exchange Rate Could be driven by Data in the Coming Sessions
Pound (GBP) investors continue to adjust positions on the British currency in reaction to last week’s UK General Election, and markets are now gearing up for another coming year of Brexit negotiations.
The first weeks of UK Prime Minister Boris Johnson’s big majority government could cause some market reaction if there are any notable developments. Upcoming UK data could also cause Sterling movement as more notable Brexit news is awaited.
Major ecostats will be published throughout the week, in the final full market week of 2019.
UK job market data will be published tomorrow, followed by inflation stats on Wednesday, retail data on Thursday and growth rate stats rounding off the week on Friday.
Upcoming Eurozone data could be even more influential, if it gives investors a better idea of whether or not the Eurozone economy is recovering from months of slowdown.
Eurozone trade balance data tomorrow, as well as a speech from European Central Bank (ECB) President Christine Lagarde and Eurozone inflation data on Wednesday, could influence the Pound to Euro (GBP/EUR) exchange rate.