Home EUR GBP/EUR: Pound Hovers Close To â‚¬1.16 As Polls Show Johnson’s Lead

GBP/EUR: Pound Hovers Close To â‚¬1.16 As Polls Show Johnson’s Lead

1st November 2019

The pound advanced versus the euro on Thursday. The pair rallied across the previous session reaching a high of €1.1628. This was the highest level that the pound has traded at versus the euro in a week.

The pound has had one of the strongest months in a decade as it heads towards the uncertainty of a general election campaign. The strong move higher has been Brexit related. As the threat of a no deal Brexit evaporated after Prime Minister Boris Johnson struck a deal with the EU, the pound has rallied.

Pound traders are now focussed on the general election on 12^th December. The pound surged in the previous session after polls indicated that Boris Johnson had a clear lead over the opposition leader Jeremy Corbyn and that support for the Conservatives was growing.

Should Boris Johnson win by a clear majority he will secure a stronger mandate from the UK electorate to push Brexit through Parliament. This means that the UK will almost certainty be leaving the EU on 31^st January with a deal, bringing an end to the ongoing Brexit uncertainty. This is good news for the pound.

There are no macroeconomic releases today leaving pound investors to remain focused on the upcoming elections.

Eurozone Growth Defies Expectations

The euro traded broadly flat versus its peers on Thursday as eurozone economic growth defied expectations. Eurozone GDP increased 0.2% in the third quarter, in line with growth from the second quarter and slightly above the 0.1% that analysts had predicted. The data calmed fears that the eurozone is heading into recession under the weight of Brexit and the ongoing US — China trade dispute.

Whilst economic growth held steady, eurozone inflation was more concerning. Inflation in the bloc, as measured by the consumer price index, increased by just 0.7%. This will be a concern for Christine Lagarde as she starts her new role as President of the European Central Bank today. The ECB eased policy in September. However, with inflation in the bloc stagnant, the central bank could be forced to act again. The prospect of lower rates prevented the euro from advancing.

Today there is no eurozone economic data for investors to digest. Euro investors will most likely focus on Brexit and US — China trade headlines.

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.