Pound to Euro Exchange Rate near 31-Month High, as Tory Majority Remains Likely

Better Than Expected UK Data Supports Pound to Euro Exchange Rate

The pound to euro interbank exchange rate stands at 1.1736 today. This is 0.24% below sterling’s recent 31-month high versus the common currency, its strongest since May 14th 2017, reached last Wednesday, at 1.1763.

GBP to Eur near 31-Month High, on 66% Chance of Tory Majority Government

Sterling remains close to this 31-month high against the euro, because markets continue to factor in a high probability that the Conservative Party will win a majority of MPs, at next Thursday’s UK general election.

According to investors, there’s a 66% chance that the Tories will win a majority of seats. In general, the world’s investors want the UK election next week to produce a decisive result, in which a single party wins.

This is because this may enable the UK to finalise Brexit, move on to negotiating our future trade deal with the EU, and unblock the UK’s domestic legislative agenda.

Sterling vs Euro Maybe Affected, by Risk of ‘Hung’ Parliament Next Week

However, looking to the next eight days until the British voting public goes to the ballot boxes, the sterling vs euro interbank exchange rate could be affected, by the shifting election opinion polls.

According to a number of surveys this week, the Conservatives may have hit their “high water mark” of support around 42%, while the opposition Labour Party continues to rise, to around 32%. The financial markets are concerned that this may raise the risk of a ‘hung’ Parliament, in which no single party wins a majority of MPs.

This has been the situation in the House of Commons for some months, and as we’ve seen, it’s caused legislative and Brexit limbo.

UK Services Data, Eurozone GDP Figures Could Affect Exchange Rate This Week

Turning to the rest of this week, the pound’s value versus the euro might also be impacted by UK and Eurozone economic data.

Today we’ll learn the second estimate of UK services sector activity for November, released by IHS Markit. Last week’s “flash” estimate was at 48.6, below the 50.0 figure that signals growth, so a result above or below this number may affect sterling.

Elsewhere, tomorrow the revised Eurozone economic growth figures for Q3 2019, between July and September, will be made public. The previous estimate was for 0.2% growth, so a figure higher or lower might influence the euro.

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.