The GBP/EUR exchange rate traded in a wide range over the past week as UK election speculation continued to drive the pairing.

GBP/EUR Struggles to Maintain Gains as UK Politics Dominate

The Pound got off to a strong start this week, climbing above €1.17 against the Euro as polling data showing the Conservatives were continuing to pull ahead of Labour.

However Sterling was unable to sustain these gains and quickly fell back on Tuesday following the first leaders’ debate, in which a tie was seen as benefiting Labour more than the Tories.

After struggling to find momentum through the mid-week, the Pound then closed the week on a bit of a sour note after the UK’s latest PMI figures revealed a shock contraction in the service sector in November.

Meanwhile the Euro found itself directionless for much of the week, with a lull in notable data leaving the currency at the mercy of market sentiment through the first half of the session.

EUR exchange rates were shaken a little in the mid-week as the European Central Bank’s (ECB) Financial Stability Review warned that the risks to the Eurozone remain tilted to the downside.

The focus at the end of the session was then on Christine Lagarde’s first speech as ECB President in which she made it clear that she would tread a similar path to her predecessor Mario Draghi.

Could the Conservative Party Manifesto Weaken Sterling?

Looking ahead to next week, we can expect UK politics to continue to act as the main catalyst of movement in the Pound to Australian Dollar (GBP/AUD) exchange rate.

Of particular interest to GBP investors will be the publication of the Conservative election manifesto.

The release of its manifesto saw the Tory lead in the polls evaporate back in the 2017, and Sterling will be vulnerable to losses if the launch of the party’s new manifesto proves to be equally disastrous.

Meanwhile, in focus for EUR investors next week will be the Eurozone’s latest consumer price index.

Eurozone inflation slipped to just 0.7% in October, and we could see the Euro could under some pressure if the CPI figures show that it continued to languish at a three-year low this month.

Also in focus will be the Eurozone’s economic sentiment index, which may put additional pressure on the single currency if pessimism in the bloc continued to grow in November.

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