Pound to Euro outlook: How will the Brexit and election shape GBP/EUR rates?

GBP EUR Higher Ahead of PMI Business Activity

The pound to euro exchange rate has been losing ground as investors prepare themselves for the likelihood of a UK election this December. Investors are gearing themselves up for the December election as parliament votes today to decide whether or not back the election.

GBP/EUR levels are still trading very close to the more recent highs we had seen which saw the pound to euro rate reach the interbank high of 1.1649 on the 22nd October. This is in sharp contrast to the lows of 1.0647 seen on the 10th August. What can we expect ahead from the pound to euro rate as these latest developments unfold?

Sterling weaker on election possibility

The prospect of an election will usually see a currency weaker, particularly owing to the wide range of outcomes we would see from this election. There is no overly clear majority looming, with Boris’ idea to generate a majority by no means guaranteed.

The Liberal Democrats are hoping to perform well following a surge in support for backing a more Remain stance. The SNP are also capturing headlines and seeking to drum up support for a second independence Referendum and to help ensure Scotland stay in the EU, however that might be possible.

The wide range of possible outcomes could see sterling rates under pressure, as historically increased political uncertainty has seen the pound lose value.

Brexit uncertainty

Ahead, the ongoing lack of clarity on Brexit may also become a factor with the initial enthusiasm for sterling being dented once the harsh realities of the election and Brexit becoming a factor once again for the market to digest.

The prospect of a no-deal Brexit has seen the pound suffer and if this remains an option, through being the Brexit party’s central policy, and the Conservative’s refusal to rule out, sterling may well find itself in troubled waters again.

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