Pound Dives Against Euro as General Election Polls Narrow

The pound euro exchange rate experienced a volatile session on Wednesday. The pair traded a range a 90-point range before closing the session flat at €1.1857. The pound is edging higher versus the euro as polling day begins and as investors look ahead to the European Central Bank rate announcement.

Election day has arrived, and the pound is advancing as investors continue to price in a Conservative victory. The latest polls show that Boris Johnson and the Conservatives remain in the lead ahead of Labour’s Jeremy Corbyn. However, the lead has narrowed to just 28 seats, down from 68 two weeks ago.

However, a Tory victory is most certainly not a full gone conclusion. This leaves the pound vulnerable in the case of a hung Parliament or even a Labour win. Voting polls open at 7am local time and close at 10pm. An exit poll at 10pm will give a good idea as to who is expected to win.

The pound favours a strong Tory majority as this is considered the surest way for Brexit to be pushed through Parliament and the UK leave the EU with a deal early next year, ending Brexit uncertainty.  Hung parliament could mean years more of Brexit uncertainty dragging on the UK economy.

Investors Eye Christine Lagarde’s First ECB Meeting

The euro move broadly higher versus its peers on Wednesday. There was no high impacting eurozone data for investors to digest. Instead the euro traded at the will of the US dollar. The euro trades inversely to the greenback, the dollar dipped in the previous session following the Federal Reserve rate announcement. The decline in the dollar lifted the euro.

Euro investors will now look ahead to the European Central Bank monetary policy announcement. Recent eurozone data has shown tentative signs of the eurozone economy stabilising. However, inflation remains a significant distance from the central bank’s 2% target. The broad expectations is for the ECB to keep rates on hold.

With no change in monetary policy expected, investors will look towards the latest staff projections. Additionally, this will be the first meeting with Christine Lagarde at the helm. Since Christine Lagarde took office on 1st November her comments on monetary policy have been few and far between. Whilst analysts are not expecting any substantially changes to the statement, market participants will be looking to her style and language in the Q and A session.


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.


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