Pound euro (GBP/EUR) exchange rate trades near three-week low
The pound euro (GBP/EUR) exchange rate is on the defensive this morning, and has hit a fresh three-week low, following France’s first stage of its general election.
At the time of writing, GBP/EUR is trading at around €1.1772, down roughly 0.3% from this morning’s opening levels.
Euro (EUR) soars following French election
The euro (EUR) is strengthening against the majority of its peers this morning and is trading at multi-week highs against some counterparts following France’s first round of elections held over the weekend.
Sunday’s results confirmed that support for the far-right National Rally (RN) party was weaker than some polls predicted, easing fears of a majority RN government.
French stock markets and the euro both surged as trade opened. Fiona Cincotta, Senior Markets Analyst at City Index, commented:
‘I think it’s a slight ‘well, there were no surprises’, so there was a sense of relief there’.
RN’s Euroscepticism and populist fiscal policies have stoked political anxiety among EUR investors in recent weeks. With it looking less likely that RN will be able to win an overall majority this weekend, relief has given the single currency a boost.
Pound (GBP) holds steady following manufacturing PMI
The pound (GBP) is managing to stay above ground against the majority of its peers this morning as the latest UK manufacturing PMI is lending the currency modest support.
Although the finalised index was revised lower in June, falling from 51.2 to 50.9 rather than rising to 51.4, the data continued point to an upward trend in the UK manufacturing sector.
Rob Dobson, Director at S&P Global Market Intelligence, said:
‘The UK manufacturing sector is enjoying its strongest spell of growth for over two years, with June seeing output and new order growth sustained at robust rates similar to May’s recent highs. The performance of the domestic market remains a real positive, providing a ripe source of new contract wins.’
However, Sterling movement is limited and will likely remain as such in advance of the UK’s general election on Thursday.
Pound euro exchange rate forecast: UK election in the spotlight
Looking ahead, the primary catalyst of movement for the pound euro exchange rate this week could be the UK’s upcoming general election.
With the election taking place on Thursday and a Labour government firmly priced in, any unexpected results could infuse significant volatility into the pound at the end of this week.
In the meantime, GBP may face muted movement as investors hold back on aggressive bets ahead of the election.
Turning to the euro, Germany will release its latest consumer price index this afternoon which could cap the euro’s current gains if inflation cooled as expected in June.
Risk appetite could also impact the GBP/EUR exchange rate this week. Should upbeat trade prevail, GBP/EUR could firm. However, should markets opt for safter assets, GBP/EUR could soften.