GBP/EUR breaches €1.18, markets convinced of a Tory majority

Philip McHugh December 5th 2019 - 2 minute read

The pound was catapulted to new multi-month highs on Wednesday amid growing expectations the Conservatives will win a landslide victory next week.

Sterling is still accelerating this morning, with GBP/EUR climbing to €1.1857, GBP/USD rallying to $1.3143, and GBP/CAD buoyed at C$1.7324. GBP/AUD and GBP/NZD have also risen, striking AU$1.9202 and NZ$2.0101 respectively.

On the docket today we have the publication of the Eurozone’s latest retail sales figures, which could dampen the appeal of the euro if sales growth contracted as expected in October.

What’s been happening?

The pound maintained its upward trajectory on Wednesday, roaring higher in response to rising bets that the Conservatives will secure a convincing majority in next week’s general election.

The majority of opinion polls show the Tories have retained a double digit lead over Labour as we enter the final week of campaigning.

Also offering Sterling some support on Wednesday was the UK’s services PMI, which saw growth in the sector revised up from a 40-month low to an 8-month low in November. 

Meanwhile, the euro traded sideways yesterday, with the single currency struggling to find support in spite of the Eurozone’s own services PMI being revised slightly higher as well.

For USD investors Wednesday’s trading session proved disappointing, with the US dollar striking a four-week low on the back of some underwhelming economic data.

This included an abysmal ADP employment reading as well as a weaker-than-expected ISM non-manufacturing PMI, stoking fears that the US economy is losing momentum.

What’s coming up?

Looking ahead, the Eurozone’s retail sales figures will be in the spotlight this morning, with the euro potentially facing some headwinds if sales growth slumped in October as forecast.

This may build on some initial losses in the euro after data published at the start of the session revealed a surprise slump in German factory orders.

Later in the day we have the publication of US factory orders, which may help the US dollar recover from yesterday’s slump if orders are shown to have rebounded as expected in October.

Finally, while UK economic data is thin on the ground today, the pound is likely to remain buoyed by election speculation.
 

Written by
Philip McHugh

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