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Euro to Pound Sterling Exchange Rate Edges Away from Multi-Year-Worst despite UK Election Focus

Euro to Pound Exchange Rate Avoids Losses amid Signs of Strength in Eurozone Economy

Despite an increasing focus on market bets that the Conservative Party will win this week’s UK election, the Euro to Pound Sterling (EUR/GBP) exchange rate has avoided notable losses today. This is partially due to the Euro (EUR) benefitting from data and weakness in rivals.

Last week’s high demand for the Pound (GBP) saw EUR/GBP tumbling from the level of 0.8522 to shed over a pence, ultimately closing the week at the level of 0.8418.

When markets opened today, EUR/GBP briefly dipped even lower, touching on an impressive low of 1.8395. This was the worst level for EUR/GBP since April 2017 – over a year and a half ago.

However, the Euro was ultimately a little more resilient than most other major currencies today, recovering slightly and holding its ground against Sterling towards the end of the day.

The currency could see more notable movement in reaction to key Eurozone data due tomorrow.

Euro (EUR) Exchange Rates Benefit from German Trade and Rival Weakness

While the Euro saw mixed movement last week and was unable to avoid losses against a strong Pound, the shared currency has been among the more resilient major currencies this week so far.

Eurozone data published throughout last week gave markets mixed signs about the Eurozone economy’s recovery outlook. While PMIs beat forecasts, October’s German factory results remained highly concerning and kept speculation about a possible German recession alight.

This week’s data so far has continued the slightly more optimistic trend though. This morning’s German trade balance results revealed a bigger than expected October trade surplus, as well as showing that German exports had avoided the predicted contraction of -0.7%.

According to Carsten Brzeski, Chief Economist at ING Germany:

‘Despite the ongoing trade conflict and a slowdown in the global economy, German exports have held up surprisingly well in recent months. In fact, looking at bilateral trade data, exports to both China and the US have increased significantly compared with 2018.’

On top of decent Eurozone data, the Euro avoided losses against Sterling thanks to continued weakness in its biggest rival, the US Dollar (USD).

Pound (GBP) Exchange Rates Remain Strong on Election Bets

Since last week, markets have been firming on bets that Britain’s ruling Conservative Party will win a solid majority at the upcoming General Election.

Polls show a solid lead for the Conservatives, bolstering bets that the party would secure enough votes to help it pass its relatively soft Brexit plans through UK Parliament. These bets led to strong Pound demand in the second half of last week.

Sterling continues to find solid support in election speculation this week so far. A weekend poll indicating that the Conservatives had slightly extended their lead over the opposition Labour Party also boosted demand for the Pound.

However, analysts continue to warn of uncertainties in the political outlook even in the event of a Conservative win, which is keeping a cap on the Pound’s potential for gains. According to Conor Beakey, Economist at AIB:

‘If the outcome is in line with the current polling data, then sterling could make further gains,

However, these could prove to be relatively short lived, once attention turns to trade talks in 2020 and the high degree of risk and uncertainty that these will entail.’

Euro to Pound (EUR/GBP) Exchange Rate May Brush Over UK Ecostats amid Election Focus

Tomorrow will see the publication of much of this week’s most influential Eurozone and UK ecostats.

Euro movement could see a shift in movement depending on the results of the day’s French production and Eurozone economic sentiment stats.

ZEW’s German and Eurozone economic sentiment stats could be particularly influential. If they beat forecasts, investors may become more confident in the Eurozone’s economic recovery. Poor data could keep Eurozone economic jitters high though, and limit the Euro’s appeal.

UK data including trade, growth and production stats will be published tomorrow as well. However, with mere days until the 2019 UK General Election, the Pound’s movement is likely to remain focused on election developments.

If upcoming polls show that the Conservative lead is narrowing the Pound’s movement could be even more volatile in the coming sessions.

Of course, the results of Thursday’s election itself will be the most influential event for the Euro to Pound (EUR/GBP) exchange rate this week.