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GBP/EUR: Pound Advances As UK Election Campaigns Step Up a Gear

18th November 2019

GBP/EUR trended higher across the previous week. The pair started last week at €1.1595 before rallying to a high of €1.1706 on Thursday. The pound euro exchange rate booked its third straight week of gains closing up 0.7%

The pound strengthened across the previous week despite poor data from the UK. Instead the pound was supported as investors weighed up the probability of Conservative leader Boris Johnson winning the general election on 12^th December.

The Brexit Party failed to field candidates in 43 seats, on top of the seats where the Party had said that they wouldn’t stand against Conservative candidates. The move gives the Conservatives even more possibility of winning the general election with a strong majority.

A strong win by the Conservatives would mean that Boris Johnson has a larger mandate to push his Brexit deal through Parliament. A win by Boris means a no deal Brexit could be avoidable, which is pound positive.

In the upcoming week, unsurprisingly, pound investors will remain consumed by the election and what it could mean for Brexit. The week ahead will see Boris Johnson go head to head with leader of the opposition Jeremy Corbyn in a televised debate, which will attract pound investors’ attention. Whilst the polls show Boris Johnson to be firmly in the lead, should Jeremy Corbyn walk away from the debate with more support the pound could take a hit.

Euro Investors Look To OECD Report & ECB Minutes on Thursday

The euro was broadly stronger versus its peers across the previous week, albeit less so than the pound. Data last week was broadly supportive of the euro. German GDP figures showed that Europe’s largest economy avoided a recession, although growth was less than impressive at 0.1%.

The deadline for the US to impose tariffs on EU autos passed on November 14^th and is due to be delayed further. However, in a speech by President Trump last week, the US President was critical of the EU, keeping tensions elevated. Any further trade tensions between the two sides could weigh on the common currency going forward.

There is no high impacting eurozone data until later in the week. Thursday sees the release of the minutes European Central Bank meeting and the latest OEDC economic outlook.

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.