GBP/EUR: Pound Steady A Boris Johnson Switches Attention To Policies

After dropping lower in early trade, the euro US dollar exchange rate has picked up sharply. The pair declined to a nadir of US$1.1074, before rebounding to current levels of US$1.1103. The euro is still struggling to push meaningfully above the key $1.11 level.

Eurozone economic data was once again in short supply on Tuesday. This left investors to focus on Brexit developments. News that the UK opposition party will finally back the Prime Minister Boris Johnson’s call for an election sent the euro higher. This is because Boris Johnson is the favourite in the polls. If he wins the election, he should have a stronger mandate from the UK electorate to push his Brexit deal through Parliament without further problems. The means that the UK could be leaving the EU on 31st January, with a plan in place.

Brexit with a deal is preferable to Brexit with no deal for both the UK economy and the eurozone. A Brexit deal would remove uncertainty and risk whilst keeping trade moving. The move towards a UK election is also a move towards a Brexit deal being achieved on 31st January. This lifted the euro off its low.

There is no high impacting eurozone data due for release today. Instead investors will look ahead to a skew of eurozone data due to be released tomorrow including German inflation, German unemployment, French GDP and eurozone consumer confidence.

US Consumer Confidence Up Next

The US dollar was holding steady in early trade on Tuesday as investors look ahead to a very busy second half of the week as far as macro-economic releases are concerned. Today dollar investors will focus on US consumer confidence. Analysts are predicting that consumer confidence jumped to 128 in October, up from 125.1. A strong labour market and robust wage growth is keeping household sentiment buoyant. However, last moth retail sales were unexpectedly weak, indicating that consumers held back on spending. Today’s data should help clarify how the US consumer is holding up.

Looking ahead, tomorrow sees the release of US GDP and then the US Federal Reserve monetary policy announcement. Analysts are expecting the Fed to cut rates again.

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 EUR = 1.12829 USD

Here, €1 is equivalent to approximately $1.13. This specifically measures the euro’s worth against the dollar. If the U.S. dollar amount increases in this pairing, it’s positive for the euro.

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

1 USD = 0.88789 EUR

In this example, $1 is equivalent to approximately €0.89. This measures the U.S. dollar’s worth versus the euro. If the euro number gets larger, it’s good news for the dollar.

 

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