Pound Euro Exchange Rate Trades Sideways Ahead Of German General Election

Modified: Tuesday, 25 June 2013 20:28 BST - Written by Frank Davies

STORY LINK Pound Euro Exchange Rate Trades Sideways Ahead Of German General Election

Pound Sterling moved ahead against the euro during yesterday’s session, sending the Pound to euro exchange rate (currency : GBP EUR) back through the 1.1800 barrier. It was the first time since 12th June that GBP EUR had risen above the 1.1800 level. The pair has been uncharacteristically quiet over the past two months as investors focussed their attentions on wild fluctuations for other major global currencies with the commodity Dollars coming in for particular attention.

The forward move for the Pound Sterling against the single currency during yesterday’s session was not driven by any specific risk events or data releases, but instead bore the hallmarks of a technical retracement. The pair reached a 5-month high of 1.1908 on 26th April and has lingered with 3c of this rate throughout the intervening months, leaving investors with one question – when the prolonged period of sideways trading ends for the Pound Euro exchnange rate, will the GBP/EUR head higher towards last summer’s peak of 1.2894, or will it retrace downwards towards its 2013 low of 1.1344?

The answer to this conundrum may lie in the political situation in the eurozone’s premier economic superpower – Germany. The Teutonic state is set to hold a general election on 22nd September, 2013. With a widespread feeling of distrust amongst the German populace towards what they perceive to be the profligate southern states which the nation’s government has had to bailout in recent years, an ‘anti-euro’ result would not come as a major surprise.

If the autumn popular ballot does yield an anti-bailout coalition at the expense of the nation’s current Christian Democrat led alliance, then the euro is likely to come under sustained selling pressure. In such a scenario, an upward break towards its 56-month high at 1.2894 would appear to be a racing certainty for the pair. Consecutive closes above this level would sound a strong ‘buy signal’ for the pair.

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