Pound to Euro Exchange Rate Steadies Following Yesterday’s Volatile Movement
Fresh polls indicating a Conservative Party majority is uncertain came in yesterday, leading to fresh Sterling (GBP) jitters and knocking the Pound to Euro (GBP/EUR) exchange rate further away from its best levels.
Despite the uncertainty though, investors have been hesitant to sell GBP/EUR that much. Compared to last week’s strong gains of over a cent from 1.1734 to 1.1878, the losses have been fairly modest.
GBP/EUR trends close to the level of 1.1860 at the time of writing, slightly below the week’s opening levels, after recovering from yesterday’s low of 1.1821. The pair is still just around half a cent below 2019’s best levels.
Britain’s public is heading to the polls today to vote in the 2019 General Election, and the outcome could have a strong impact on the Pound. Euro (EUR) investors on the other hand are anticipating the European Central Bank’s (ECB) December policy decision today.
Pound (GBP) Exchange Rates Jittery on Election Day Hung Parliament Concerns
The Pound has seen weeks of strong performance recently, amid rising bets that the ruling Conservative Party would secure enough seats in the 2019 General Election to secure a comfortable majority.
Investors bet that a Conservative majority would allow the party to more easily pass its relatively soft Brexit plans, which have in turn softened no-deal Brexit fears.
However, signs of uncertainty in polling, as well as analyst warnings about further Brexit uncertainty even after a potential Conservative majority, have been limiting the Pound’s potential for gains recently.
Polls have continued to show a narrowing Conservative lead this week, keeping markets anxious about the possibility of a hung Parliament. This knocked the Pound slightly yesterday and the currency is steadying today.
Analysts warn that the Pound could be in for sharp movements as the results come in. According to Chris Weston, Head of Research at Pepperstone:
‘Prices should jump around…with likely sharp reactions as each constituency releases their results,
One for the bravest of souls.’
Euro (EUR) Exchange Rates Steady Ahead of European Central Bank (ECB) amid Unsurprising Inflation
Market demand for the Euro has been fairly sturdy this week overall, and may have registered more gains against the Pound if not for the Pound’s election hopes strength.
The shared currency has been boosted by continued signs of recovery in the Eurozone economic outlook, with surprise rebounds in ZEW’s economic sentiment stats on Tuesday.
While today’s German and French Consumer Price Index (CPI) inflation rate stats met forecasts, the Euro remained overall sturdy ahead of the European Central Bank’s (ECB) December policy decision later.
It will be the first policy decision of new ECB President Christine Lagarde, and analysts do not expect much shift in tone from her predecessor Mario Draghi. This expectation is keeping the Euro fairly steady today.
Pound to Euro (GBP/EUR) Exchange Rate in for Volatile Night
Today could be one of the most influential days of the year for the Pound, and for the Pound to Euro exchange rate.
The results of Britain’s 2019 General Election will come in throughout the night and will dominate market movement throughout Friday.
While a Conservative Party majority is still widely expected and this is keeping the Pound high, there is still the possibility of an unexpected result that could cause a shock to markets.
If there is a close outcome that leads to a hung Parliament, the Pound could quickly plummet and shed much of its recent gains.
On the other hand, even in the event of a Conservative win, the Pound’s gains could be limited as Brexit uncertainty would retake focus.
While Sterling will be the focus, the Euro could be in for notable movement today as well as investors react to Christine Lagarde’s first European Central Bank (ECB) policy decision.
If Lagarde maintains the cautiously dovish stance shown by predecessor Draghi, the Euro’s movement will be limited.
However, if she shows more optimism that the Eurozone economic outlook is improving, the Euro’s recent strength will be bolstered and this will put more pressure on the Pound to Euro (GBP/EUR) exchange rate.