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Pound Euro (GBP/EUR) Exchange Rate Left Flat as Labour Supports December General Election

October 29, 2019 - Written by John Cameron

Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as PM Pushes for December Election

The Pound Sterling Euro (GBP/EUR) exchange rate was left muted and the pairing is currently trading around €1.1603.

The Pound was left under pressure on Tuesday as investors awaited Prime Minister Boris Johnson’s next attempt to push for a December general election.

However, it seems Johnson will face less opposition as Labour Leader Jeremy Corbyn revealed the party would support an early general election as the condition of removing a no-deal threat had ‘now been met’ after the EU offered its ‘flextension’.

It is expected that the Pound will be provided with a temporary upswing of support if there is an election as this will mean Johnson’s Brexit deal is likely to be passed through parliament more easily.

Commenting on this, MUFG currency analyst, Lee Hardman noted:

‘The expectation is that [Johnson] should be able to get the vote passed in Parliament today for an early election.

‘From our perspective it’s difficult to see where the obvious downside risk for the Pound is.

‘We don’t see the no-deal risk going back to the table any time soon. Even if the government doesn’t do as well [in the election], that would increase the influence of the opposition parties who want an even softer deal.’

Euro (EUR) Left Flat as Eurozone Corporate Lending Slows

On Monday, data revealed that corporate lending in the Eurozone was beginning to slow after a period of resilience which likely left the Euro flat.

Bank lending to companies in the bloc fell in September, with corporate loan growth falling from 4.3% in August to 3.7%.

While household lending remained steady at 3.4%, this suggested that despite the fresh stimulus launched by the European Central Bank (ECB) that encourages banks to continue to provide credit, instead banks are taking credit out of the economy.

Next month’s data will reveal whether this was a one-off blip or whether the uncertainty and slowdown that has enveloped the bloc is starting to have an impact on lending demand.

Pound Euro Outlook: Will Disappointing Eurozone Confidence Weigh on EUR?

Looking ahead to Wednesday, the Euro (EUR) could fall against the Pound (GBP) following the release of the Eurozone’s business confidence.

If October’s business confidence slumps further than expected, the single currency is likely to be left under pressure.

Meanwhile, Brexit is likely to remain one of the main catalysts for movement of Pound exchange rates as it is very likely the UK will have a general election in December.

While it is largely expected the Conservatives will win the election, it has been suggested that those probabilities could shift rapidly as the election date approaches, which could cause the Pound Euro (GBP/EUR) exchange rate to fall as investors brace for a multitude of scenarios.

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