GBPEUR: Sterling Awaits Scottish Election Result

GBPEUR: Sterling Awaits Scottish Election Result

The GBPEUR exchange rate is higher on Friday after seeing a sharp sell-off on yesterday’s BoE rate announcement. Some data was released this morning for European trade and UK construction, but the market wants more clarity on the Scottish election picture. Counting began at 9am on Friday and traders are looking to see if the SNP can secure a majority.

GBPEUR bounced off the 1.15 level yesterday and now trades at 1.1522.

SNP majority predicted by YouGov

Nicola Sturgeon’s SNP party is currently on track for a fourth term, but the question is whether a majority is possible. A final study by YouGov has said that the SNP will secure a four-seat majority and predicted that the party would get 52% of the constituency vote and 38% on the regional list. Another poll by Panelbase expected a “knife-edge” majority.

As things stand, the SNP looks likely to get a majority, but the underlying support is not really there for changing the course of the nation with another independence vote. It seems in politics that everything is split down the middle these days, with support for Scottish independence, Brexit and the Joe Biden Presidency, three examples of razor-thin majorities but that is a sign of the times.

The same YouGov study also forecast that Scottish Greens could double their current MSP tally with 13% of the vote. This would actually boost the voices for an independent Scotland, but the unfortunate situation for Scottish voters is that most of what they can vote is then hijacked for another tilt at independence and seen as a mandate.

The GBPEUR was stuck at 1.15 for a full week until a 100 pip rally over the first half of this week. Those gains evaporated yesterday as the Bank of England cut its bond buying programme by £1bn per week. The bank reassured investors that it wasn’t a change of policy stance and also committed to the path of no rate rises until 2023. The BoE upped its growth forecast to 7.2% for the UK economy.

EU trade and UK construction growth

German companies shrugged off the economic turmoil to increase export levels for the eleventh month in a row during March, according to data from the Statistics Office. German export growth hit 1.2%, which was twice the pace economists had forecast. Exports to the UK fell for a third-straight month since the country left the EU’s internal market on January 1st, with goods shrinking by 13.2% to €6.5 bn. Italian retail sales were poor with a reading of -0.1% after a strong bounce last month to around 6%.

British construction activity also continued its bounce last month, with the index close to a six-and-a-half-year record set in March.

The IHS Markit/CIPS Construction Purchasing Managers’ Index (PMI) dipped slightly to 61.6 in April from 61.7 in March, but new orders have jumped as the reopening gives businesses hope that the worst of the restrictions are behind them.