The pound dipped lower versus the euro for yet another session on Thursday. The pound euro exchange rate dropped to a low of €1.1316 before picking up slightly into the close. The pound continues to hover around a 4-month low versus the common currency.
|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. 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 GBPIn 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.|
The pound remains depressed as investors brace themselves for a pro-Brexit replacement for Theresa May. Whilst Theresa May is refusing to resign, pound investors are assuming that she won’t be able to remain for much longer. Pressure in Westminster for her to leave is intensifying as her party braces itself for humiliating results from the European Parliamentary elections.
Today Theresa May’s fate could be decided as she meets Graham Brady, chairman of the 1922 committee of backbenchers. He will warn her that she will be ousted unless she sets a date for her departure. Should Theresa May come to the conclusion that she won’t be able to get her Brexit deal through Parliament, she could decide to resign in the coming days. However, the most likely course of action is that she will remain until early June, after President Trump’s visit.
Apart from developments in Westminster, retail sales data could offer some support to the pound. Analysts are expecting retail sales to have increased by a solid 4.3% year on year. Strong data could offer support to the otherwise beaten pound.
|Why does strong economic data boost a country’s currency?|
|Solid economic indicators point to a strong economy. Strong economies have strong currencies because institutions look to invest in countries where growth prospects are high. These institutions require local currency to invest in the country, thus increasing demand and pushing up the money’s worth. So, when a country or region has good economic news, the value of the currency tends to rise.|
The euro was broadly in favour in the previous session despite disappointing minutes from the European Central Bank (ECB), weak pmi data and the start of the European Parliamentary elections.
The ECB minutes showed that the central bank policy makers are growing increasingly concerned over the health of the eurozone economy. The ECB were losing confidence that the eurozone economy could recover in the second half of this year. Because of this the ECB could increase support to the eurozone economy, but first they want more data to analyse. A more supportive monetary policy from the ECB would pull the euro lower.
Today, investors will continue looking towards polls from the European elections. Voting will continue until Sunday; the results should start to come through late Sunday evening. Signs of populist parties doing well could weigh on the euro.
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