The pound weakened versus all its G10 peers on Tuesday, including the euro. The pound euro exchange rate slipped 0.3% lower in the previous session, paring some of Monday’s gains, and closing the session at €1.1655.
Whilst the pound rallied on Monday as investors cheered the Conservative’s lea in the polls, on Tuesday the pound dropped as investors became nervous over the Conservative’s lead narrowing heading towards the 12th December elections. The latest polls showed that the main opposition party, Labour, were making up ground since unveiling the party election manifesto last week.
A kantar poll on Tuesday showed that the Conservatives were on 43% whist Labour were on 32%. An ICM/Reuters poll showed that the Conservatives were on 41% whilst Labour were on 34%.
Pound investors are keen for the Conservatives to win the elections with a clear majority because they are tying this to the most likely chance of Boris Johnson’s Brexit bill being cleared through Parliament. A Conservative majority could bring an end to Brexit uncertainty and an exit from the EU by 31st January. Should the election produce a hung Parliament, the Brexit uncertainty that the UK has experienced over the past three and half years and which has weighed on the British economy will almost certainly continue for the foreseeable future.
Today there is no high impacting UK macro-economic data. Investors will remain fixated by the polls.
The euro climbed cautiously northwards on Tuesday, lifted in part by stronger than expected German consumer confidence data. German household sentiment, unexpectedly, is set to increase in December. The Gfk consumer confidence index printed at 9.7 points, up from 9.6 in November.
Euro Looks To German Inflation Data
Analysts commented that the Germany economy avoided a recession in the third quarter thanks to exceptionally high levels of consumer confidence among German consumers, which keeps them spending and consequently supporting the economy. Third quarter German GDP was 0.1%, better than the -0.1% contraction that analysts had forecast.
Whilst there is no high impacting eurozone data due for release today, investors will look ahead to Thursday when Germany will remain in focus with German inflation data. Analysts ae expecting German inflation to have declined -0.6% month on month in November. A weak reading could weigh on the common currency.
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. |