The pound euro exchange rate had a mixed week, concluding in the pair closing the week just shy of the €1.16 level. The pair hit a high of €1.1651 on Tuesday before trending lower across the week, dropping to a low of €1.1549 on Thursday. The pound is pushing higher at the start of the new trading week.
Data showing that the dominant UK service sector stagnated in October unnerved pound trades early in the previous weeks, whilst a more dovish that forecast Bank of England hit the pound later in the week. Whilst the central bank kept monetary policy unchanged, as analysts predicted, two monetary policy makers voted to cut interest rates immediately. Market participants had not been expecting two dissenters. This weighed on the value of the pound because the BoE is a step closer to cutting interest rates than it was previously.
With Parliament officially dissolved and the election campaign in full swing, investors will be watching the polls closely. Boris Johnson is firmly in the lead which should offer some support to the pound. This is because if Boris Johnson wins but a clear majority, he will have a stronger mandate to push his Brexit deal through Parliament, quickly. With Boris Johnson winning there is a higher chance of the UK leaving the EU with a deal on 31st January, therefore avoiding a damaging no deal Brexit.
In addition to the polls there is a raft of high impacting data to capture pound investors’ attention across the week. These include UK GDP data today. Analysts expect the UK economy rebounded in the third quarter, growing 0.3%. A strong reading could boost the pound.
Euro Shrugs Off Spanish Election
The euro trade broadly weaker across the previous week amid continued concerns over the health of the German economy. Despite data from the bloc generally surprising to the upside, it was insufficiently positive to remove fears that Germany was tipping into recession.
Investors will be looking ahead to German GDP later this week which will confirm whether Europe’s largest economy contracted in the third quarter. The German economy contracted in the second quarter; two straight quarters of contraction make a technical recession.
The euro has barely reacted to the Spanish general election, suggesting that investors are not concerned about political instability in Madrid.
|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.