The pound euro exchange rate rallied 0.1% across the previous week. The pair closed on Friday at €1.1583. The pound is falling versus the euro as the new week begins.
After the European Union agreed to extend Brexit and Parliament voted in favour of a general election last Tuesday, pound investors have focused on the polls. Polls showing that Boris Johnson had a strong lead boosted the pound last week. Should Prime Minister Boris Johnson win the election and by a clear majority he would win a stronger mandate to push his Brexit deal through Parliament. In this scenario the U.K. would have a much higher probability of leaving the EU by 31st January deadline with a deal in place. This would mean that a damaging no deal Brexit would be avoided, which is positive for the pound.
The polls will remain in focus this week. Any shifts in the polls could create volatility in sterling. As reports that Johnson was losing his lead emerged, the pound lost ground.
Also this week, pound investors will look ahead to the Bank of England monetary policy announcement on Thursday. Analysts are expecting the central bank to keep monetary policy on hold. However, the BoE could also drop their tightening bias in favour of a more neutral stance as the U.K. economy is weighed down by Brexit and a broader global slowdown.
Today investors could glance briefly towards construction activity data. Analysts predict that the construction pmi picked up in October from the 43.1 low in September. However, the sector is expected to stay firmly in contraction.
Christine Lagarde, Manufacturing PMI & Consumer Confidence
The euro was broadly in favour across the previous week, albeit less so than the pound. Euro investors digested a mixed bag of data, with GDP growing by more than what analysts forecast at 0.2% quarter on quarter. This eased fears that the bloc is heading towards a recession.
Inflation data was not so comforting. Eurozone inflation increased a lacklustre 0.7% year on year in October, down from 0.9% in September. The low inflation will be a cause for concern for Christine Lagarde after she formally took over as European Central Bank President on Friday. Investors will be listening closely when Christine Lagarde gives a key speech this evening, in Berlin, to see whether she will adopt a similarly supportive stance to Mario Draghi.
Eurozone manufacturing pmi figures and consumer sentiment will also be in focus.
|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.