Sterling rose against the euro as a Conservative Party victory was perceived to be more likely after the Brexit Party stepped aside to prevent splitting the vote across the two main pro-Brexit parties. However, Chris Curtis, the Political Research Manager at the YouGov polling company, was sceptical about any breakthrough, saying: “[G]iven the Brexit party was already trending downwards in the polls, it looked like this was happening already. So, despite today’s drama, this is unlikely to be a game-changing moment.”
In UK economic data, today saw the British economy avoid recession in the third quarter, with the UK GDP figure rising from -0.2 per cent to 0.3 percent on a quarter-on-quarter basis. However, this was less than the 0.4% growth expected.
Tej Parikh, Chief Economist at the Institute of Directors, was downbeat in his assessment, saying: “With uncertainty likely to persist and a continued slowdown in global markets, the onus is on the new government to stimulate economic activity and move the UK beyond its current yo-yo pattern of growth.”
Meanwhile, the euro remained subdued on growing fears over a possible technical recession for Germany, the Eurozone’s powerhouse economy.
Euro traders have remained jittery despite improving German trade figures in September, with concerns now rising over declining demand for automobiles, one of Germany’s most lucrative sectors.
Jörg Krämer, an Economist at Commerzbank, was also downbeat about growth for the Eurozone’s largest economy, saying: “Once the [economic] downturn is over, however, there is unlikely to be a strong economic recovery… the German export industry will suffer for a long time to come.”
The pound to euro exchange rate will continue to be dictated by British political developments this week, with any signs of the Conservative Party consolidating their lead in the polls ahead of December’s election likely to boost confidence in Sterling.