Following a jump in demand for the Pound yesterday, the British Pound to Euro (GBP/EUR) exchange rate has seen more mixed movement today. Investors sold the pair from its best levels overnight, but UK election hopes and mixed Eurozone data have meant that its losses are limited.
As a result, GBP/EUR is on track to have sustained most of the gains seen in recent weeks. Last week saw modest gains for GBP/EUR, as the pair advanced slightly from 1.1583 to 1.1595 throughout the week.
This week’s gains have been more solid so far. GBP/EUR briefly touched on a 6 month high of 1.1675 yesterday following the day’s election news, but the pair quickly slipped back from those highs and trended closer to the level of 1.1650 today.
The primary cause for the Pound’s jump in demand this week so far has been news that the Brexit Party would not campaign election candidates in seats that were won by the ruling Conservative Party in the previous election.
This boosted hopes that the Conservative Party would have less obstacles to winning a majority in next month’s general election, briefly causing investors to pile into Sterling amid bets for a relatively soft Brexit to become reality.
However, the Pound’s best levels didn’t last long, as investors considered speculation from some analysts that the news would ultimately have little impact on the election outcome.
The Pound’s appeal was further limited today by the latest UK job market report, which fell short in many key prints and kept investors concerned about the health of Britain’s economy amid Brexit uncertainty.
Wages and job vacancies were unexpectedly weak, which some analysts took to indicate signs that Britain’s job market was showing signs of slowdown.
On top of these pressures weighing on Sterling today, GBP/EUR was weaker due to some slightly stronger Eurozone data supporting the Euro.
Concerns about a German recession and lasting Eurozone slowdown have been among the primary causes of Euro weakness in recent months, but today’s latest confidence data offered a glimmer of hope.
ZEW’s November economic sentiment survey results showed that while current conditions were even worse than expected, economic sentiment looking ahead has unexpectedly rebounded.
German economic sentiment improved from -22.8 to -2.1 rather than -13, and the overall Eurozone print jumped from -23.5 to -1 rather than worsening to -32.5.
The data reflected hopes that the international outlook was improving due to higher optimism surrounding Brexit and US-China trade relations. However, for now the data was not enough to notably soften German recession jitters.
Looking ahead, the Pound to Euro exchange rate will continue to be driven by UK election developments, but signs of further strength in Eurozone data could boost the chances of a Euro recovery.
Multiple key Eurozone ecostats will be published in the coming days, starting with German inflation and Eurozone production tomorrow. These will be followed by German and Eurozone growth, as well as Eurozone inflation, on Thursday.
If Eurozone data beats forecasts, the Euro is more likely to strengthen on hopes of a Eurozone economic rebound. However, weak Eurozone data will keep investors anxious about the slowdown persisting.
As for the Pound, upcoming UK inflation data tomorrow and retail stats on Thursday could influence the Pound if they surprise investors.
Failing that though, UK election developments and Eurozone data are most likely to influence the Pound to Euro exchange rate in the coming days.