GBP/EUR exchange rate midweek update: pound jumps higher versus euro following Trump's victory
04/11/2024 to 06/11/2024: The pound euro (GBP/EUR) exchange rate was given a shot in the arm by Donald Trump's triumph in the US presidential election, which undermined the single currency.
Monday
The pound euro (GBP/EUR) exchange rate edged below the €1.19 benchmark after the Eurozone’s manufacturing PMI for October hit the headlines.
The finalised index remained within contraction territory (a reading below 50) but printed above economists’ forecasts, rising from 45.0 to 46.0, a fraction higher of than a more modest 45.9 expectation.
A declining dollar ahead of the presidential election and Fed interest rate decision, rather than the upbeat Eurozone PMI, lifted the euro due to its negative correlation with the US currency.
Despite a data lull in the UK, the pound kept its head above water as last week’s budget-induced fall in Bank of England (BoE) interest rate cut bets continued to offer tailwinds. Investors in the pound hope the budget could stoke inflation and subsequently slow down the pace the central bank unwinds monetary policy.
Tuesday
The pound euro rate drifted above the €1.19 benchmark as it struggled to gain meaningful traction ahead of the pivotal BoE policy decision on Thursday. Investors were also subdued amid the uncertainty surrounding the US presidential election.
The pound was buoyed by the latest UK services PMI which reported that the powerhouse sector crept further into the expansion zone (a reading above 50), edging up from 52 in October from 51.8 the previous month. However, activity continued to see slowing momentum, posting the weakest rise since November last year, limiting the pound’s upside.
The UK currency was also shackled by data showing British retailers suffered an underwhelming October against a backdrop of pre-budget uncertainty. According to the British Retail Consortium (BRC)-KPMG Retail Sales Monitor UK retail sales were up 0.6% year-on-year last month against a 2.6% increase 12 months earlier.
Wednesday
The pound jumped above €1.20 after Donald Trump secured his return to the White House as America’s 47th president.
The euro was hit by stronger headwinds than the pound due to concerns over Trump’s pledge to introduce a 10% global import tariff, which could damage the Eurozone economy. As the Eurozone’s single largest trading partner, the new US tax will increase costs for manufacturers in the bloc and lower business output.
Looking ahead
The BoE is poised to vote for its second interest rate cut this year despite the announcement of looser fiscal policy. The central bank’s Monetary Policy Committee deliver its latest policy decision on Thursday, with economists forecasting a quarter-point reduction in the benchmark rate to 4.75%.