The pound drifted away from a 6-month high versus the euro on Thursday. After having touched €1.1767, a level not seen since March, the pound euro exchange rate trended lower before closing 0.15% lower on the day at €1.1726. The pair is advancing in early trade on Friday.
The pound had initially stormed higher in the previous session, on election speculation, following the MRP poll. The polls predicted that the Conservatives would win on 12th December by a 68-seat majority. However, the pound’s spike higher was short lived.
Whilst the poll had been flagged as the most accurate of the polls carried out before the election, doubts set in. Concerns that the poll will have missed out on the most recent political developments unnerved investors, as did fears that the Conservatives would become complacent. Boris Johnson is being criticised on Friday for failing to make some media appearances.
The polls will continue to drive sterling. Signs of the Tories winning a majority will lift the pound as investors associate a Tory victory to a Brexit deal being achieved.
This week has been a quiet week as far as UK economic data is concerned. Today investors could glance towards UK consumer confidence data. Analysts are expecting UK consumer confidence to remain depressed in November. This would not be an encouraging sign for the economy heading into the crucial festive shopping period. Low household sentiment often means consumers are less willing to part with their money. A weak reading could see the pound fall.
Will Eurozone Inflation Boost Euro?
The euro was broadly weaker in the previous session, although less so than the pound, thanks to disappointing German inflation data. Consumer prices in Europe’s largest economy declined by -0.8% month on month in October. This was below the -0.6% decline forecast. On an annual basis inflation remained steady at 1.1%. This was below the 1.2% than analysts had pencilled in.
There have been tentative signs in German data this week that the economy could be turning a corner. The weak inflation figures aren’t necessarily supportive of that theory. The jury is still out on where the German economy from here. Investors will be watching today’s releases of German retail sales data and unemployment data closely for clues.
Investors will also turn towards eurozone inflation figures which could be supportive of the euro. Analysts are expecting inflation to tick higher in the bloc, which could ease pressure on the European Central Bank to loosen monetary policy further.
|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.