After pushing to €1.1908, the pound tanked versus the euro late in the US session. The pound dropped to a low of €1.1819, near to where it closed the session. The pair remains under pressure in early trade on Wednesday.
The pound tanked following the release of the latest YouGov MRP poll. This is the poll that famously predicted that Theresa May would lose her majority in 2017. The MRP poll showed that the Tory lead is receding with just one day to go until the general election. This poll shows that the chances of a hung Parliament are now greater than previously. The pound dropped as a hung parliament is tied to further indecision and delay over Brexit meaning that the lingering Brexit uncertainty that has weighed on the UK economy could continue.
A slew of worse than expected data on Tuesday also dampened demand for the pound. UK GDP data, industrial output and construction data as well as the UK trade balance all surprised to the downside, painting a pretty grim picture of the UK economy as it approaches the end of the year.
With no data to distract, it is all about the polls for sterling today.
Euro Buoyed By Encouraging ZEW Data
The euro was broadly in demand in the previous session, just fractionally less than the pound. Euro investors cheered improved sentiment in both the eurozone and Germany. German investor sentiment brightened to the strongest level in almost two years. The ZEW sentiment survey index increased from -2.1 to a better than forecast 10.7. This was its first positive reding since April amid optimism that trade tensions between the US and China are slowly dissipating.
The data, along with unexpectedly strong German export data earlier in the week has helped boost hopes that Europe’s largest economy will avoid a contraction in the final quarter. There is growing optimism that the slowdown could be bottoming out.
Today there is no high impacting eurozone data due to be released. However, several important US data points and the FOMC rate decision to come. Given that the euro trade inversely to the dollar, the euro could experience heightened volatility on the back of dollar movements.
|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.