Pound to Euro Exchange Rate Forecast To Break 1.1900 GBP/EUR After German Election Result

September 24, 2013 - Written by James Fuller

STORY LINK Pound to Euro Exchange Rate Forecast To Break 1.1900 GBP/EUR After German Election Result

The Pound Euro exchange rate gained ground yesterday in spite of a strong eurozone PMI survey. Losses for the single currency were triggered by increasing indecision following the German election result.

The Pound to Euro exchange rate (GBP/EUR) is currently trading up by 0.49% at 1.1891 GBP/EUR. The Euro to Pound exchange rate is currently trading at 0.8410 EUR/GBP.

Confidence levels amongst eurozone economic participants appear to be on the up and up if yesterday’s Purchasing Manager Index survey for the region is to be believed. The September gauge of activity levels across all sectors of the euroland economy showed at 52.1, significantly up from last month’s print of 51.5 and well ahead of analysts’ expectations of a 51.8 result.

However, the relatively positive leading indicator from mainland Europe was insufficient to stop the single currency giving up ground against the Pound – a move which sent the Sterling euro exchange rate (GBP/EUR) up to within a handful of pips of the 1.1900 threshold by the end of yesterday’s North American trading session.

The move against the euro during yesterday’s trading was primarily driven by a mixed response from the rest of the eurozone to Angela Merkel’s thumping Federal Election win in Germany. The popular vote gave a ringing endorsement to Merkel’s pro-spending cuts policies for the euro-area’s struggling peripheral states, but the reaction from Greece towards the outcome was far from positive with several national dailies billing the result as a victory for austerity.

Fears regarding the possibility that Merkel’s centre-right Christian Democrats may not be able to form a working coalition following the failure of their erstwhile partners the liberal Free Democratic Party to win a single seat in the Reichstag added to the selling pressure on the euro yesterday. A tame showing from this morning’s German IFO Business Survey is likely to see the Pound to Euro exchange rate settle above the 1.1900 threshold.

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