The pound to euro interbank exchange rate stands at 1.1718 today. This is 0.4% below sterling’s recent 31-month high versus the Eurozone’s common currency, its strongest since May 14th 2017, reached last Wednesday 27th November, at 1.1763.
Pound Weakens as Poll Gap Between Conservatives and Labour Narrows
Sterling stands below its 31-month high versus the euro, in part because the opinion polls continue to tighten, ahead of the UK’s general election, next Thursday 12th December.
For example, according to the New Statesmen magazine’s ‘Britain Elects’ poll tracker, the Conservatives have fallen by 0.4% to 42.4%, while the opposition Labour Party has risen by 2.1% to 31.8%.
This tells us that the gap between the two main parties now stands at 10.6%, close to the 10.0% lead that’s traditionally needed to grant the winning party a majority of MPs in Parliament. It’s thought that, if next week’s vote isn’t decisive, the UK’s Brexit limbo may continue.
Sterling Supported as Markets Factor in 64% Chance of Tory Win
However, it’s useful to note that sterling still remains near its 31-month high versus the euro, even though its 0.4% down. In part, this because, in spite of the narrowing gap between the Tories and Labour, Prime Minister Boris Johnson’s party remains over 10% ahead, according to the New Statesman’s “poll of polls”.
Moreover, the markets are factoring in a 64% chance that the Conservatives will win a majority of MPs next Thursday. The world’s money managers want a single political party to win next week’s election, because it’s thought that this will contribute to the UK’s economic and political stability, and Brexit might be resolved faster.
UK Manufacturing PMI Rises, Still Below 50.0, May Affect Pound
Elsewhere, it’s worth noting that the UK’s manufacturing PMI (Purchasing Managers’ Index) was revised higher for November, according to watchdog IHS Markit yesterday. In particular, the second estimate for UK factory activity this month reached 48.9, above the previous figure of 48.3.
This remains below the 50.0 point that separates economic growth from contraction, suggesting that manufacturing will subtract from the UK’s economic growth in the final months of 2019.
However, markets may take heart from the fact that November’s figure rose, which could bode well for a recovery next year, and may influence the value of sterling.
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.