The GBP/EUR exchange rate stuck its worst levels since February this week as political pressures in the UK weighed heavily on Sterling sentiment.
Sterling Sinks as May’s Days Numbered
The Pound to Euro exchange rate tumbled this week, falling to a new three-month low as persistent political uncertainty in the UK weighed on markets.
Driving this uncertainty was the announcement that Theresa May would set out a timetable for her departure as PM following a fourth parliamentary Brexit vote next month, with observers speculating that May could be out the door by mid-June.
Adding to the pressure on Sterling were also some mixed UK employment figures, which saw a surprise fall in unemployment in March undermined by some weaker-than-expected wage growth over the same period.
Meanwhile the focus for EUR investors this week was the publication of Germany’s preliminary GDP figures for the first quarter, with a solid lift in growth dispelling recession fears and buoying EUR sentiment.
However it was the announcement that the US would delay plans to impose tariffs on cars that sparked the strongest movement of the week, with the news coming as a major relief to Europe’s vital automotive sector and turbo charging the Euro on Wednesday.
Will the EU Elections Rock the GBP/EUR Exchange Rate?
Looking ahead to next week, we are likely to see some volatility in the GBP/EUR exchange rate, courtesy of the EU elections taking place on Thursday.
For GBP investors, the elections are seen as a proxy for a second referendum on Brexit, something that could dent the Pound if –as currently forecast- the Brexit party secure the largest number of seats.
Outside of the elections, Sterling may receive a small lift in the first half of the session if UK inflation is shown to have accelerated in April as forecast.
Meanwhile EUR investors face the prospect of a swell in support for populist parties throughout Europe, with an increased number of seats for Eurosceptic MEPs likely to dent the appeal of the Euro.
In terms of data, the Euro could also come under fire if the Eurozone’s latest PMI figures indicate that growth in the bloc’s private sector remained weak through May.
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