GBP/EUR: Pound Extends Gains Ahead Of UK GDP

Sterling soared to a fresh 31 month high of €1.1914 versus the euro on Monday, before retreating. GBP/EUR exchange rate closed at €1.1882 0.01% higher on the day in the 6th consecutive positive session. The pound is extending those gains as the European session begins on Tuesday.

Election speculation and optimism surrounding a clear Conservative win in the general election this coming Thursday boosted the pound at the start of the week. The polls point to the Tories winning by an overall majority, which investors see paving the way for a Brexit deal being approved in Parliament. The Conservative’s market friendly policies are also being favoured over Jeremy Corbyn’s left leaning stance and the uncertainty which he brings to Brexit. With just two days to go until the UK hits the polling stations, the polls will remain in focus.

Today investors will also look towards UK GDP data for a snapshot of the health of the UK economy as it heads towards Brexit early next year. Analysts are expecting economic growth in the three months to October to be flat at 0%. This would be down from the 0.3% increase in the three months to September. On a monthly basis analyst are predicting that economic growth increased by 0.1%, up from -0.1% in September. Given that the monthly GDP reading tends to be quite volatile investors often focus on the three-month reading.

ZEW Sentiment Data To Drive Euro

The euro was broadly flat versus its peers in the previous session, as investors digested German export data and as they look ahead to today’s Zew sentiment data.

On Monday, unexpectedly strong German export data plus improving eurozone business sentiment figures helped underpin the common currency. Following disappointing industrial and consumption data from Germany in the previous week, investors cheered signs that the German economy could narrowly avoid a contraction in the final quarter of the year.

Today data will remain take centre stage as investors turn their attention to the ZEW Economic sentiment survey for October. Analysts are expecting to see a slight improvement in sentiment, with current situation expectations picking up from -24.7 to -22.1. Whilst this is a step in the right direction, historically sentiment remains very weak and could drag on the value of the euro.

What do these figures mean?
When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.

For example, it could be written:

1 GBP = 1.13990 EUR

Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound

Or, if you were looking at it the other way around:

1 EUR = 0.87271 GBP

In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro.


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