Sterling Declines Against the Euro as Concerns Grow over Hung Parliament

Sterling Declines Against the Euro as Concerns Grow over Hung Parliament

The pound to euro exchange rate stands at 1.1632, at the time of writing. This is 0.75 cents or 0.65% below sterling’s six-month high versus the Eurozone’s common currency, reached last Monday 18th November, at 1.1725.

In part, the sterling vs euro interbank exchange rate has weakened this week, because the financial markets are increasingly uncertain that next month’s UK general election will deliver a stable, majority government.

Also, sterling has weakened, because the UK’s manufacturing and services PMIs (Purchasing Managers Indices) for November arrived below forecasts, says fresh data this morning.

Sterling Weakens Following ITV Election Debate, Concerns over ‘Hung’ Parliament Risk

The pound has weakened against the euro this week, particularly following this Tuesday’s ITV election debate, between Prime Minister Boris Johnson and Labour leader Jeremy Corbyn. According to a YouGov poll of 1,600 people following the broadcast, just 51% thought that Mr. Johnson had won, versus 49% who favoured Mr. Corbyn.

This has raised concerns that, in spite of the Conservatives 12% lead in the opinion polls, according to YouGov’s latest survey, there might be a ‘hung’ Parliament following the December 12th vote.

In this case, Parliament may remain deadlocked, and it’s possible that the UK could again run up against its Brexit deadline. For some investors, this raises the risk of a ‘No Deal’ Brexit.

For example, Derek Halpenny, Head of Research for Global Markets EMEA and International Securities at MUFG, says that: “The outcome from the UK election is a risk factor for the pound and European currencies. If the election delivers a hung parliament, market participants could initially become more concerned over the return of ‘no deal’ Brexit risk by the end of January.”

UK Manufacturing Services PMIS Disappoint Weighing Further on GBP/EUR Interbank Rate

Also, another reason why the sterling vs euro interbank exchange rate has weakened today is because the UK’s manufacturing and services sectors eased further in November, says trusted data. According to IHS Markit’s monthly PMIs, UK manufacturing fell to 48.3 this month, while British services dropped to 48.6, both below the 50.0 figure that signals growth.

Turning to next week, the Bank of England releases its Inflation Report Hearings on Wednesday 27th, while Eurozone inflation figures for last month are made available on Friday 29th. Both these releases may impact the GBP/EUR interbank exchange rate.

If you would like to learn more about what may affect the GBP/EUR or have an upcoming currency transfer, feel free to contact me, Tom Holian, using the form below.