The pound dropped sharply versus the euro overnight. The pound euro exchange rate declined to a low of €1.1884. This is some way off the high of €1.2046 reached after the resounding Conservative election victory.
The pound slumped overnight amid growing fears that the UK could still suffer a hard Brexit. Newly elected Prime Minister has made it clear that there will be no extension to the transition period which is due to end in December 2020. Investors had assumed that Boris Johnson would look to extend the 1 year transition period because it is clearly not enough time to agree the necessary trade deals to prevent the UK leaving the EU without a trade deal in place. Fears of a hard Brexit dragged on the pound.
Today investors will look towards the UK labour market data. The report is expected to show that the unemployment rate ticked higher to 3.9%, up from 3.8% and that average weekly earnings slipped lower the three months to October to 3.4%, down from 3.6%. These figures would show that the UK labour market was starting to feel the pressure from the slowing economy. Weak jobs data could weigh on demand for the pound.
Euro Dismisses Weak Data
The euro was broadly stronger in the previous session as investors focused on the prevailing good mood on trade developments rather than on the gloomy data from the eurozone.
With a trade deal agreed between the US and China and with clarity over Brexit, risks that have weighed on the eurozone economy and particularly Germany could start to ease. Optimism over a less risky outlook lifted the euro, enabling investors to shrug off the dismal PMI data from the bloc.
Today the eurozone economic calendar is much quieter than Monday. Investors will look towards eurozone trade balance data. There is also a lot of US data due to be released. The euro often trades inversely to the US dollar, so any volatility in the dollar could be reflected in 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. |