The pound euro exchange rate has booked noticeable gains across the week hitting a six month high of €1.1703. The rate gained a further 0.2% on Thursday in its third consecutive winning session. The pair is holding steady in early trade today and is up 0.8% across the week heading into Friday
The pound moved higher versus the euro on Thursday despite weak UK retail sales and better than expected eurozone data. UK retail sales unexpectedly contracted -0.3% October. Analysts had forecast a 0.2% increase month on month. The weaker monthly data meant that on an annual basis, retail sales increased just 2.7%, well below the 3.4% forecast. Analysts believe that political uncertainty was impacting consumer behaviour, the pound remained resilient regardless.
Political speculation has underpinned the pound across the week, even amid softer than forecast macro-economic data. Optimism is growing among investors that the general election on 12th December will make a worst-case scenario, no deal Brexit avoidable.
The polls continue to show that Boris Johnson maintains a firm lead over his rivals meaning that a Conservative win is the most likely outcome 4 weeks until polling day. A win for the Conservatives means that Boris Johnson’s Brexit deal should quickly make its way through Parliament ensuring the UK leaves the EU by 31st December with a Brexit deal in place. Thanks to Brexit deal optimism and a Boris boost, the pound is advancing.
Today there is no UK macro-economic data to be released. Investors will remain fixed on UK election political headlines.
Eurozone Inflation Up Next
Demand for the euro has remained limited across the week, even as important pieces of eurozone and German data have beaten analysts’ expectations. In the previous session the euro failed to gain ground even after data showed that Germany unexpectedly and narrowly avoided a recession. Germany recorded economic growth of 0.1% in the third quarter. This was above the -0.1% contraction that analysts had pencilled in. Whilst the data was a relief for market participants, analysts still warn that signs of recovery in Europe’s largest economy remains weak.
Today euro investors will look towards eurozone inflation. Analysts are predicting that inflation will remain steady at 0.2% month on month, just 0.7% year on year. Despite the European Central Bank loosening monetary policy in September, inflation has failed to pick up. A weak inflation reading could prompt investors to believe more monetary easing is on the way, sending the euro lower.
|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.