News that the UK avoided recession and that the Brexit party would not be running against the Conservatives in December’s election, boosted the pound versus the euro on Monday. The pair closed 0.4% higher at €1.1654.
The British economy grew 0.3% quarter on quarter in the third quarter, rebounding from -0.2% contraction in the second quarter. Whilst this was a much-improved reading, on an annual basis the UK economy grew a feeble 1%, down from 1.3% in Q2 and short of analysts’ expectations of 1.1%. The data showed that the UK avoided recession, which helped lift the pound. However, growth on an annual basis is the slowest that it has been in five years.
The pound shot higher on Monday following reports that Brexit party Nigel Farage indicated that he will not field candidates against Conservative MP’s in the general election in December. So, in the 317 seats that the Conservatives won at the last election, a Brexit party candidate will not stand. The aim being to not divide Brexit votes. The pound shot up because this move by Farage increased the chances of Boris Johnson securing the strong majority that he needs to be able to push Brexit through Parliament.
Today investors will look towards UK jobs data. Average wages are expected to remain steady at 3.8% year on year in the three months to September. Analysts expect the unemployment level to hold at 3.9%. Any sign of weakness in the labour report could send the pound lower.
Will German ZEW Data Boost Euro?
The euro trended lower versus the pound on Monday following weak German producer price index (PPI). PPI measures inflation at wholesale level, which disappointed at just -0.1% month on month in September. Whilst this is second tier data, it still unnerved investors because it adds to the weakening economic picture for Germany.
The election results in Spain did little to boost the euro. Elections in Europe’s fourth largest economy resulted in a hung Parliament. Negotiations will now begin to see whether the leading party Pedro Sanchez’s PSOE party can cement a coalition. Political analysts do not expect this to be an easy job and negotiations could go on for months. This could weigh on the euro going forward.
Today investors will remain glued to the eurozone economic calendar with ZEW German economic sentiment due to be released. Analysts are expecting sentiment to have improved slightly in Germany in November which could offer some support to the euro. However, eurozone sentiment is expected to decline further.
|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.