 |
The pound slipped versus the euro across the previous week. In fact, the majority of those losses were booked on Friday when the pound dropped 0.3% versus the common currency. The pound euro exchange rate lost 0.3% across the week, ending Friday at €1.1640. The pair is pushing higher at the start of the trading week.
Data showing the UK businesses experienced their deepest downturn in three and half year sent the pound sharply lower on Friday. Activity in both the manufacturing sector and the service sector disappointed. The IHS Markit/ CIPS UK purchasing managers index (PMI) for manufacturing and the service sectors showed the slowdown has quickened in November. The PMI’s point to the UK economy contracting at a pace of 0.2% in the fourth quarter. Such pronounced weakness ahead of Brexit unnerved investors sending the pound southwards.
UK data is in short supply this week leaving investors to turn their focus back to the election campaigns ahead of the general election on 12th December. Last week Labour leader Jeremy Corbyn unveiled his party’s election manifesto. The high taxes, heavy spending and nationalisation drive increased concerns over the outlook of the UK economy, pulling the pound lower.
Boris Johnson released his election manifesto over the weekend. The manifesto is more business friendly and pledges to spend just £2.9 billion a year extra compared to Labour’s £83 billion. The pound is pushing higher thanks to the Tories more moderate manifesto. Investors will watch closely what the polls say. Should the polls show the Conservative lead narrowing the pound could come under pressure. This is because pound investors are tying a Tory win with Brexit with avoiding a no deal Brexit as well as a business-friendly government.
US — EU Trade Issues Could Keep Pressure On Euro
The euro was subdued across the previous week. Earlier in the moth investors learnt that Germany narrowly avoided a technical recession. However, data continued to show that the eurozone economy is fragile. Germany’s composite pmi data for November stayed firmly in contraction.
Euro could see renewed selling pressure in the coming week should the US — EU trade tensions flare up. Officials in Washington are reportedly are looking at new ways to impose tariffs on the EU, after President Trump missed the deadline on 14th November to impose tariffs. This matters for the euro because a prolonged period of EU — US could weaken the already contracting manufacturing sector adding to deflationary pressures.
German confidence figures will be under the spotlight this morning. Inflation and a second reading of German GDP for the third quarter will grab investor attention later in the week.
|
| 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. |
