- Pound Euro Near 1.15 – Pair struggles to sustain recovery
- UK Election Uncertainty Rises – Conservative-Labour poll gap halves
- Eurozone PMIs Impress – May projected to see strong economic activity
- Forecast: UK Growth Data Due Thursday – Election developments could also affect GBP
Pound Euro Slips to 1.15 Again on Wednesday
After a brief recovery on Tuesday night and Wednesday morning to the level of 1.16, the Pound Euro exchange rate slipped again on Wednesday afternoon. At the time of writing, GBP EUR trended in the region of 1.1580.
The day’s speech from European Central Bank (ECB) President Mario Draghi didn’t offer anything new to traders, but slightly boosted Euro sentiment as the central banker was optimistic that the Eurozone’s recovery was increasingly solid.
He also stated there was not yet any reason to change the current policy guidance, in news that likely disappointed some investors but was overall not surprising.
The Pound could be influenced by UK growth data on Thursday. However, if the second Q1 GDP projections come in at 0.3% quarter-on-quarter and 2.1% year-on-year as expected the Pound is unlikely to see much movement.
[Previously updated 12:47 BST 24/05/2017]
Despite recovering to above the key level of 1.16 on Wednesday morning, the Pound Euro exchange rate dipped again slightly in the early afternoon as investors awaited a speech from European Central Bank (ECB) President Mario Draghi.
The morning’s Eurozone data also supported the shared currency. GfK’s German consumer confidence print for June was predicted to remain at 10.2 but unexpectedly rose to 10.4, indicating stronger than forecast confidence in the Eurozone’s biggest economy.
Meanwhile, the Pound remained limp. While election jitters had cooled somewhat, a lack of influential UK ecostats so far this week has left traders with little reason to buy Sterling.
[Previously updated 16:58 BST 24/05/2017]
Pound Euro Edges Away from Weekly Lows
UK general election jitters cooled slightly on Tuesday afternoon, allowing the Pound Euro exchange rate to recover from its worst levels towards the end of the day’s European session.
While GBP EUR remained in the region of 1.15, it neared the level of 1.16 once again.
The day’s slew of strong Eurozone datasets, including PMIs, business confidence surveys for France and Germany, as well as solid German growth data for Q1 2017, failed to keep the Euro at its best levels.
Demand for the shared currency weakened slightly throughout the day as it emerged that Greece had thus far failed to win new debt deals.
[Previously updated 12:43 BST 23/05/2017]
While its losses slowed on Tuesday, the Pound Euro exchange rate remained weak and new its new monthly low of 1.1529 as of the time of writing.
Sterling failed to benefit from UK Prime Minister’s U-turn on the controversial ‘dementia tax’ social care proposal, as the possibility of the Conservatives seeing less than a clean and easy election victory is still concerning to markets.
The pair was kept near its lows by Tuesday morning’s Eurozone data, which was largely optimistic and continued to indicate that the embattled currency bloc was still recovering from the debt crisis.
Germany’s manufacturing PMI projection for May was particularly impressive. It was forecast to slow from 58.2 to around 58, but instead jumped to 59.4. The Eurozone’s overall composite PMI also beat expectations by avoiding a drop and holding at 56.8.
[Published 06:00 BST 23/05/2017]
The Pound Euro exchange rate dropped again on Monday after tumbling last week. A lack of fresh UK data left the Pound vulnerable to the weekend’s news that the upcoming UK general election may be more uncertain than previously expected.
GBP EUR plunged from 1.1790 to 1.1630 last week despite strong UK data, and Monday saw the pair tumble further and hit a new low of 1.1560. This was the pair’s lowest level since the end of March.
Pound (GBP) Undermined by UK General Election Uncertainty
After weeks of confidence that the upcoming UK general election would end in a landslide for the Conservative party, potentially making Brexit negotiations smoother, sentiment was dented this week which knocked the Pound lower.
Due to a controversial social care proposal from UK Prime Minister Theresa May, the Conservative’s massive polling lead against the Labour party had essentially halved in the space of a week.
The Tories previously enjoyed a lead of around 20 points, but pollsters have shown the lead dip to around 10 points. Some polls have the Conservative leading by single digits only.
Amid concerns that the race could continue tightening before the election on the 8th of June, market uncertainty has risen and the Pound has become notably less appealing.
Kathleen Brooks, research director from City Index, stated the following about the Pound’s Monday losses;
‘While a 9-point lead could still give Theresa May a comfortable victory on 8th June, the fact her lead has been slashed in half in just a few days may reinforce to financial markets that her victory is not a certainty. With three weeks to go before the election, another bad PR week for PM May and her team and the Tories’ lead over Labour could fall further into the low single figures, which could encourage sterling selling ahead of this crucial vote.’
The imminence of formal Brexit negotiations means that a potential shift in UK leadership would cause the future of UK-EU relations to be even more uncertain.
Euro (EUR) Gains on Angela Merkel Comments
Demand for the Euro has been improving in recent weeks and could keep climbing if data follows the recent strong trend. Optimism from German and French officials about the future of the Eurozone has kept the Euro solid.
Monday saw the shared currency get yet another healthy boost, this time from German Chancellor Angela Merkel.
On Monday, Merkel made a speech at a school in Berlin at which she said the ‘too weak’ Euro was part of the reason for Germany’s persistent trade surplus, as it made German products relatively cheap.
She said part of the reason for the Euro’s weakness was loose European Central Bank (ECB) policy.
Merkel took the opportunity to talk about strengthening Germany’s relationship with France thanks to new French President Emmanuel Macron.
German finance minister, Wolfgang Schaeuble, has also talked up the possibility of stronger France-Germany collaboration to strengthen the Eurozone.
On Monday, Schaeuble stated alongside new French finance minister Bruno Le Maire that ‘We know that strengthening the currency union is of particular importance, both of us believe that Germany and France have a special responsibility to take the lead’.
Pound Euro Forecast to React to Eurozone PMIs
Tuesday’s data is more likely to have a direct influence on the Pound Euro exchange rate due to a slew of influential Eurozone stats due for publication.
Markit will publish its preliminary May PMIs for the Eurozone on Tuesday which are predicted to see similar performance to April. Germany’s key manufacturing PMI is forecast to slow just slightly from 58.2 to 58.
If German and overall Eurozone PMIs hold above 55 as expected, the Euro is likely to continue to perform strongly on Tuesday.
However, much worse-than-expected PMIs would cause European Central Bank (ECB) interest rate hike bets to drop and the Euro would weaken.
Tuesday will also see May business confidence surveys for Germany from Ifo, as well as French business confidence for May and Spanish trade balance stats from March.
Any shifts in UK general election polls have the potential to influence the Pound, but otherwise the Euro is more likely to drive movement in the Pound Euro exchange rate on Tuesday.