ExchangeRates.org.uk - The British pound held around 1.18 against the Euro overnight after Labour secured a historic landslide over the Conservatives in the 2024 UK General Election. At the time of writing, the Pound to Euro (GBP/EUR) exchange rate traded at around €1.17989, virtually unchanged from Thursday’s opening rate. The Conservatives faced substantial losses, as did the Scottish Nationalist Party, while the Liberal Democrats emerged as the third-largest party.
Pound (GBP) Flat as UK Heads to the Polls
The Pound (GBP) struggled to garner investor attention on Thursday and traded mostly flat against its peers as Britons headed to the ballot box. With Kier Starmer’s Labour party expected to win a landslide victory, GBP investors were reluctant to place any aggressive bets before the results. A forecast by polling firm Survation predicts the Labour Party is expected to win 484 of the 650 seats in parliament. As the Labour party have outlined their commitment to fiscal responsibility, a landslide victory could see Sterling sentiment bolstered following the results.
A note from Barclays (LON:BARC) read: ‘Thursday’s general election is this week’s main focus, with most plausible scenarios, according to available opinion polls, catalysing further pound strength in our view.’
However, should the party be met with a smaller-than-expected majority, this could infuse significant volatility into GBP exchange rates on Friday.
Euro (EUR) Subdued following Lacklustre German Factory Orders
The Euro (EUR) remained trading sideways against the majority of its peers on Thursday following the publication of the latest factory orders from Germany. Factory orders in the Eurozone’s largest economy unexpectedly fell from -0.6 to -1.6% in May, missing forecasts of a 0.5% rebound. The slowdown was primary put down to a decreasing number of aircraft, ship, train and automotive product orders, and marked the fifth consecutive month of decline.
Analysts at Germany’s Economy Ministry commented: ‘Together with the recent deterioration in business expectations in the manufacturing sector, the continuing decline in orders points to rather subdued momentum in industry in the coming months. Orders are only likely to stabilise once global trade continues to recover and demand for industrial products gradually picks up.’
This saw the single currency struggle to catch bids.
GBP/EUR Exchange Rate Forecast: UK Election in Focus
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate this week will likely be the UK’s general election results. Will Labour secure a majority and bolster GBP? Or will any unexpected surprises stymie Sterling sentiment on Friday? Turning to the Euro, the Eurozone will release its latest retail data on Friday. The index is expected to show that in May, retail sales increased by 0.2% on a monthly basis, and rebounded from April’s underwhelming 0.5% decline. Should the data print as expected and show signs of improved consumer spending, this may underpin EUR exchange rates. The latest German industrial production data is also due out on Friday, and is expected to report a marginal uptick in industrial output in the Eurozone’s largest and export-heavy economy. Will a return to growth in Germany’s all important industry sector lend EUR exchange rates some extra support? Risk appetite could also impact the GBP/EUR exchange rate for the remainder of this week. Should a risk-on mood prevail this week, GBP/EUR could climb. However, should markets opt for safer assets instead, GBP/EUR could close the week on the defensive.
This content was originally published on ExchangeRates.org.uk
