After several high impacting data releases on Wednesday, the pound euro exchange rate closed 0.1% lower at €1.1569.
A number of Brexit headlines were supportive of the pound in the previous session. News that the House of Lords has approved Boris Johnson’s early election bill, the first hurdle for the bill, boosted demand for sterling. As did reports that the Brexit Party is considering pulling out of hundreds of seats in order to boost the Tories chances of winning a majority in the general election. This would be a game changer for Boris Johnson, who otherwise could struggle to get the seats that he requires for a clear majority in Parliament.
With a December 12th election agreed, pound investors will now turn their full attention to the polls. Any changes in the polls could provoke a strong move in the pound. Whilst many investors believe that Boris Johnson, the current favourite, will win the election and win a stronger mandate for Brexit, political analysts have urged caution. The reality is that this election could be one of the hardest elections to accurately predict given the stakes. Volatility in the pound is likely to continue.
German Inflation Remains Low, EZ Inflation Up Next
Euro investors had plenty of data to digest in the previous session. German inflation as measured by the consumer price index (CPI) remained low in October at 0.9%, well below the 2% target. Meanwhile, German unemployment continued to rise. The figures highlighted the struggles that new European Central Bank President Christine Lagarde will inherit when she takes over on Friday.
The data shows that the ECB’s huge stimulus efforts have so far failed to deliver an uplift in inflation. Even with Germany slipping into recession the German government has been reluctant to increase fiscal spending. Christine Lagarde has joined a chorus of voices that are upping pressure on governments to increase spending in an effort to shore up their economies and lift inflation.
Today the focus will remain on inflation. Eurozone CPI data will be released. Analysts are predicting that eurozone inflation will decline further to just 0.7% year on year in October, down from 0.9%. Such a weak reading could unnerve investors.
|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.