Home EUR GBP/EUR: Pound Pops As MRP Poll Predicts Large Conservative Majority

GBP/EUR: Pound Pops As MRP Poll Predicts Large Conservative Majority

28th November 2019

The pound has traded in an increasingly erratic fashion this week. After rising on Monday and falling on Tuesday the pound was back on the rise on Wednesday. The pound closed 0.6% higher versus the euro at €1.1750.

The swings in sterling come amidst increasing political uncertainty in the UK ahead of the general election on 12^th December. Investors have been watching the polls closely. The pound rallies on signs that the Conservatives will win the election with a clear majority. This is because a Conservative majority is being tied to Boris Johnson’s Brexit bill being pushed through Parliament by 31^st January and the UK avoiding a no deal Brexit.

The pound jumped to session highs on Wednesday after the most relevant UK poll showed a significant Tory lead. The Multilevel Regression and Post-Stratification (MRP) YouGov poll is the most eagerly awaited poll of the election. This is because the newly developed technique is believed to give a more accurate prediction than standard opinion polls. This was the poll that correctly predicted that Theresa May would lose her majority in 2017.

The poll showed that the Conservatives are in the lead and could win with a majority of 68. This lifted the pound. However, it is worth pointing out that at the last election the MRP poll did not correctly predict every seat. The difference between a Conservative majority and a hung Parliament could just be a few seats. Standard polls are showing that the Conservatives lead is narrowing.

There is no economic data due to be released today. Investors will remain glued to the polls and election headlines.

Will German Inflation Boost Euro?

The euro lacked catalysts on Wednesday given that there was no high impacting eurozone economic data. The common currency came under pressure owing to the stronger US dollar. The euro trades inversely to the US dollar. The dollar jumped after data showed that the US economy grew faster than initially forecast in the third quarter.

Today euro investors will be watching German inflation numbers. Analysts are forecasting a -0.6% decline month on month in October. However, on an annual basis, analysts are predicting that inflation will tick higher to 1.3%, up from 1.2%. Higher inflation after an uptick in GFK consumer confidence and the stronger than forecast German GDP could indicate that the German economy is stabilising. This could boost the euro.

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.