Pound euro (GBP/EUR) fluctuates on UK election day
(Updated 15:45, 04/07/24) The pound euro (GBP/EUR) exchange rate continues to trade without a clear direction this afternoon amid a data-light end to the session.
Elsewhere, tepid remarks from the European Central Bank’s (ECB) Chief Economist Philip Lane further deterred investor interest in the euro (EUR).
Speaking at a lecture in Naples, Lane noted that the Euro bloc continues to see easing wage growth, with these pressures likely to desist further throughout 2025.
Lane said:
‘Compared to last year, where a lot of (firms) were expecting wages to go by five or six (percent), now they’re saying around three to four, The reason why we think inflation will come down … next year is that this is the last year of high wage increases and the wage increases will look more normal.’
The dovish commentary reinforced market speculations that the ECB is likely to deliver at least one more interest rate cut this year, thereby souring EUR sentiment.
Looking to the pound (GBP), a lack of any further left GBP vulnerable to ongoing election jitters in the UK. Investors remained hesitant to place any aggressive bets on Sterling ahead of tomorrow’s finalised election results.
Looking ahead, could a landslide victory for Labour see hopes of UK economic stability bolster GBP?
At the time of writing, GBP/EUR is trading at €1.1807, virtually unchanged from this morning’s opening levels.
Original article continues below:
Pound euro (GBP/EUR) exchange rate fluctuates as UK election takes precedent
The pound euro (GBP/EUR) exchange rate is holding close to a weekly high this morning on UK election day, as Germany’s economic woes persist.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1815, virtually unchanged from this morning’s opening rate.
Pound (GBP) wobbles as Britons take to the ballot box
The pound (GBP) is largely subdued this morning as election day jitters deter investors interest in Sterling.
With UK voters casting their ballots for parliamentary elections across England, Scotland, Wales and Northern Ireland today, the pound is struggling to edge higher.
However, hopes of a landslide victory for the UK’s Labour party appear to be keeping GBP afloat. Having topped the polls in recent weeks, Labour is widely expected to oust Rishi Sunak’s Conservative Party, marking its first election win since 2005.
Derren Nathan, Head of Equity Research at Hargreaves Lansdown, said:
‘Opinion polls are suggesting one of the biggest landslides the nation has ever seen for Labour, but they have been wrong before.’
Economists have predicted that such a political shift could restore investor confidence in the UK economy, following a tumultuous period of political instability and far-right progress in both the US and Europe, thereby restoring the UK’s safe-haven political status.
Euro (EUR) flat as German factory data disappoints
The euro (EUR) is struggling to attract investor support this morning following an unexpected decline in the latest German factory data.
Domestic factory orders fell by 1.6% on a monthly basis in May, declining for a fifth consecutive month and also missing market forecasts of a 0.5% rebound.
Decreased orders for aircraft, ships, trains and automotive products drove the decline, while a rise in electronics, computers and optical products cushioned further losses.
Analysts at Germany’s Economy Ministry noted:
‘Together with the recent deterioration in business expectations in the manufacturing sector, the continuing decline in orders points to rather subdued momentum in industry in the coming months. Orders are only likely to stabilise once global trade continues to recover and demand for industrial products gradually picks up.’
Elsewhere, investors may avoid placing any aggressive bets on the single currency ahead of the publication of the European Central Bank’s (ECB) latest meeting minutes this afternoon.
Pound euro exchange rate forecast: Eurozone retail sales in focus
Looking ahead, the Eurozone’s latest retail data is due for release on Friday morning. Economists expect retail sales In May to have increased by 0.2% on a monthly basis, rebounding from the previous month’s 0.5% decline.
Should the data print as forecast, signs of improved consumer activity may lend the common currency support, indicating that Euro consumers are starting to feel the effects of lower price pressures.
The latest German industrial production data is also due out on Friday. Economists expect to see a slight increase in industrial output in the Eurozone’s largest and export-heavy heavy economy. A return to growth in the vital German industry sector could further boost EUR sentiment as the week draws to a close.
For the pound, the UK’s election results will be in focus. Any elective surprises could fuel notable GBP volatility.