Home Business Pound Euro exchange rate: GBP/EUR left flat as YouGov downgrades Tory majority...

Pound Euro exchange rate: GBP/EUR left flat as YouGov downgrades Tory majority forecast

Pound Euro exchange rate: GBP/EUR left flat as YouGov downgrades Tory majority forecast 1

Sterling remained under pressure on Wednesday after a YouGov poll left markets less sure that Prime Minister Boris Johnson would secure a majority in this week’s election. According to the highly-anticipated poll, the Conservatives are still likely to secure a majority, although they will win with only a modest majority. YouGov have downgraded the majority from 68, which they predicted two weeks ago, to 28 seats, although they also noted that Mr Johnson could potentially fail to win a majority.

The potential for further Brexit uncertainty if the Conservatives fail to win a majority has weighed on Sterling this morning. 

Commenting in the poll’s results, YouGov’s director of political research, Anthony Wells told The Times: “Based on the model, we cannot rule out a hung parliament”.

Many believe a hung parliament would be the most negative outcome for GBP exchange rates in the short term as there would be no party able to resolve the current Brexit impasse. 

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Chief market analyst at XTB, David Cheetham noted: “Given the margin for error in this poll, as well as the trend which has shown a clear narrowing of the majority […] Thursday’s election outcome is far from a foregone conclusion.”

Meanwhile, the single currency remained under pressure today, just a day away from the European Central Bank’s (ECB) interest rate decision. 

This will follow a rate decision from the US Federal Reserve, and dovish comments from either bank could weigh on market sentiment. 

Markets do not expect ECB Chief Christine Lagarde to announce any policy changes when she holds her rate-setting meeting this week.

However, this is the first chance markets will have to hear how she communicates with the public and markets, and her comments could spark some movement. 

As the new head of the ECB she has many challenges ahead, including managing the dissent within the bank caused by the latest stimulus policy that was unleashed during predecessor Mario Draghi’s second-to-last meeting.

Commenting on the upcoming monetary policy meetings, Commerzbank rates strategist, Rainer Guntermann noted: “Expectations for policy action from the ECB and Fed are subdued. Lagarde’s communication style will be watched closely, but that’s unlikely to lead to any repricing in bond markets.”

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