The pound bounded higher versus the euro on Thursday before paring gains and heading back to the flat line. The pound euro exchange rate rallied to a peak of €1.1705 before easing to close at €1.1671.
The pound declined in the previous session after Labour leader Jeremy Corbyn unveiled his election manifesto. The manifesto promised to hike taxes and unleash a huge spending drive. His far-left policies sparked fear among businesses and investors of a return to the 1970’s state intervention. The pound dropped sharply.
Pound investors are so focused on the elections that the pound brushed off the worst October for public finances for five years. Data showed that the UK’s net borrowing figure for October rose to £10,509 billion. The high borrowing figure is most likely down to Brexit preparations. However, it is unlikely to deter whoever wins the election from heavy spending, although investors may start considering how increased fiscal spending could impact the economy.
Today any shift in the polls will drive movement in the pound. Investors will also look towards pmi data. Analysts expect the manufacturing sector to slip deeper into contraction. The service sector is also expected to remain stagnated in October. The readings could take the shine off the pound heading into the weekend.
The euro finished Thursday on the front foot as investors digested the minutes from the latest European Central Bank meeting and as investors look ahead to a barrage of data due for release today.
PMI Data To Support The Euro?
The minutes showed that a plea was made for patience, for policy makers to give the easing measures taken in September time to work through the economy. The minutes showed that policy makers supported a wait and see approach. A strong call for more unity with dealing with inflation was also made.
Today investors will digest a slew of high impacting data. Analysts are expecting pmi data for the eurozone and Germany to show an improvement in October. Whilst manufacturing pmi’s are expected to show continued contraction, the rate of slowing is easing.
Investors will also watch a speech by ECB President Christine Lagarde closely for any clues as to the future direction of monetary policy.
|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.