The GBP/EUR exchange rate ticked higher this week, even very briefly testing the waters at €1.17 as the odds of the Conservatives securing a majority in the upcoming election appeared to rise.
GBP/EUR Strikes Fresh Six-Month High on Election Speculation
The Pound got off to a stellar start this week, rocketing higher following the news that Nigel Farage’s Brexit party would step aside in all Conservative held constituencies.
The move was seen as giving the Tories a leg up in the upcoming election as it would avoid splitting the leave vote in the seats already held by the party.
However GBP exchange rates were left mostly range bound through the remainder of the week.
This came on the back of some underwhelming UK economic data, with wage growth, inflation and retail sales all printing below expectations and stoking speculation that the Bank of England (BoE) may cut interest rates in early 2020.
Meanwhile the Euro struggled to hold its ground through the first half of the week, in spite of a notable improvement in Eurozone economic sentiment, in November.
This was likely due to caution ahead of Germany’s long awaited GDP figures which were widely expected to show the country slipped into a recession in the third quarter.
While Germany surprised by returning to growth in Q3 this failed to provide any lasting gains for the Euro, as analysts remained downbeat on the country’s economic prospects going into 2020.
UK Politics to Remain a Key Catalyst Next week
Looking ahead to next week, in the absence of any notable UK economic data, movement in the Pound to Euro exchange rate looks set to be dictated by domestic politics.
With less than four weeks until the general election on 12th December, parties will finally begin to launch there manifestos, starting with Labour next week.
This may give rise to some volatility in Sterling if Labour’s manifesto pledges manage to resonate with the public as helps the party to catch up with the Conservatives in the polls.
Meanwhile, in the Eurozone the focus will be on the publication of the Eurozone’s latest PMI figures.
This could cast the Euro lower next week if the figures show that growth in the bloc’s private sector continued to stagnate in November.
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