The sterling vs euro interbank exchange rate stands at 1.1890 today at the time of writing. This is just 0.19% below the pound’s recent 31-month high against the euro, its strongest since April 23rd 2017, reached yesterday, at 1.1913.
By comparison, back on August 10th 2019, the pound to euro interbank exchange rate was as weak as 1.0646. So it’s since strengthened by 11.68%, or by close to 12.5 cents.
To stay up-to-date with the sterling vs euro interbank exchange rate, visit Pure FX’s Rates & Tools page. Here, scroll down to the Latest Market Rates Widget, to see this week’s interbank rates.
Also, to check what’s influencing the value of the pound against the Eurozone’s common currency, go to our GBP to EUR Exchange Rate Updates page. Here, click on the most recent article.
One reason why the pound to euro interbank exchange rate stands near this 31-month high, is because YouGov is set to release its updated “MRP” poll, ahead of the UK’s election this Thursday.
Another factor why the sterling vs euro interbank exchange rate remains supported is because the latest opinion surveys suggest that the Tories will win a majority, at the ballot boxes this week.
However, looking to Thursday’s vote, GBP’s value against the EUR could be affected, as there remains the risk of a ‘hung’ Parliament, in which case no single political party wins a majority of MPs.
GBP to EUR Rate Near 31-Month High, Ahead of Updated YouGov MRP Poll
As I mention, one reason why the sterling vs euro interbank exchange rate stands near this 31-month high at 1.1890 today is because respected polling company YouGov is set to release its updated “MRP” (Multi-level Regression and Post-stratification) poll tonight at 22.00 GMT.
The MRP was the only poll to accurately predict the 2017 general election result, so it’s closely watched.
YouGov released a preliminary MRP for the 2019 election, back on Wednesday 28th November. That survey forecast that Prime Minister (PM) Boris Johnson’s Conservative Party is set for a majority of 68 MPs.
This would be well ahead of 2017’s election result of a ‘hung’ Parliament, and would theoretically enable a stable, majority UK government to form, thereby benefiting sterling.
In particular, it’s thought that sterling might be affected by YouGov’s updated MRP tonight, if it shows that the Tories maintain a lead of 11% or above over Jeremy Corbyn’s opposition Labour Party.
This is because, under the UK’s First Past The Post (FPTP) electoral system, an 11% or above lead increases the odds that the winning party will win an ample majority, to govern stably.
If YouGov’s updated MRP poll tonight shows that the Tories might win more than 68 seats, this could affect the pound too.
In theory, this would be enough for PM Johnson to quickly pass Brexit before the end of 2019, get on with negotiating the UK’s future trade deal with the EU, and work on the UK’s domestic legislative priorities like roads and schools. This may lift the UK economy.
In turn, if UK businesses see that there’s a stable majority government, and clarity over Brexit, they might be more inclined to hire more staff or invest in new technology.
This could further accelerate the UK’s GDP (Gross Domestic Product) growth in 2020, while making the UK an attractive investment destination for international money managers. This too could boost sterling.
For example, Stephen Gallo, a strategist with BMO Capital Markets, says that "If the CON/LAB gap is 11% or better, we would expect the [pound sterling] rallies to continue.”
Meanwhile, Peter Kinsella at Union Bancaire Privée (UBP) comments that "A Conservative majority means the new government will be able to ratify the EU Withdrawal Agreement before the end of December."
Like I say, YouGov’s MRP is released tonight at 22.00 GMT, ahead of the UK’s general election this Thursday 12th December. The poll might be worth watching out for, for its effect on sterling.
Pound Exchange Rate Remains Supported, as Polls Indicate Tory Win
Moreover, another reason why the sterling vs euro interbank exchange rate stands near this 31-month high today is because the latest opinion polls continue to suggest that PM Johnson’s party will win a majority of MPs, at this Thursday’s election.
In general, the financial markets want a single political party to win this week, to bring economic and political stability to the UK in 2020.
For example, according to Politico’s latest “poll of polls”, released on Monday, the Tories stand at 43% support, next to Labour’s 33%. Traditionally, this would point to a Parliamentary majority.
Moreover, compared to Politico’s “poll of polls” this time in 2017, PM Johnson’s party stands 0.7% higher, from 42.3%, while Mr. Corbyn’s Labour is down by 7%, from 40% at the last vote.
In general, it’s thought that if a single political party wins this week’s vote, the next UK government may find it easier to pass laws.
For example, Peter Kinsella at UBP says that "The predicted majority implies that the new government will not have to rely on the support of the Democratic Unionist Party, meaning that the DUP will be unable to frustrate or stonewall” the Brexit vote.
With this in mind, the world’s money managers are increasingly confident that the polls are accurate, and that the result of the election will be decisive.
In turn, global investors have lifted the probability of a majority Conservative government by 15% from a week ago, to 80%. This is the highest percentage since the general election campaign started in mid-November.
Meanwhile, the financial markets are also increasingly confident of a Tory majority win, because YouGov’s latest polls for Wales suggest that Mr. Johnson’s party is making inroads there.
According to the survey company, the Conservatives could gain eight seats from Labour on Thursday. This data has also assured the financial markets of a clear outcome, thereby lifting GBP.
Sterling Vs Euro Rate Could Be Affected, if MRP Points to Slimmer Majority
However, looking to the release of YouGov’s MRP tonight, the pound to euro interbank exchange rate could be influenced, if the updated poll suggests that PM Johnson’s Conservatives might get a majority of MPs smaller than the 68 previously projected.
This is because, in this case, the next UK government might find it tougher to finalise Brexit, or work on the future EU trade deal.
In particular, the financial markets remain concerned about the possibility of a ‘hung’ Parliament. This is when no single political party wins a majority of seats in the House of Commons.
As a result, though a government might be formed, it often has to form pacts with other parties to pass laws, or the opposition can gang together, to take control of Parliament’s legislative agenda.
If this happens, then the Brexit limbo could continue, ahead of the UK’s current deadline of January 31st 2020.
In this case, the world’s money managers might become concerned again about the possibility of a “No Deal”, in which the UK exits the EU without compensatory arrangements. Alternatively, the UK could have to ask Brussels again for yet more time, for MPs to decide on Brexit.
In turn, if this Thursday’s election result isn’t decisive, and the Brexit limbo continues, British businesses might continue to put off their hiring and investment decisions next year.
This could slow the UK economy more than if Brexit were finalised quickly, and thereby might affect the value of sterling versus the euro on the interbank market, and against other currencies like the US dollar.
For example, Stephen Gallo, at Capital Markets says that: "We're still very reluctant to call this result, and we suspect that "uniform swing" expectations are not all that helpful this time around due to the Brexit factor."
Meanwhile, Samuel Tombs, UK Economist with Pantheon Macroeconomics says that a Tory majority “is not set in stone”, especially as “13% of voters are still undecided”.
Mr. Tombs adds that "11% of Labour voters in 2017 don’t know how they will vote on Thursday, exceeding the 9% share of former Tory supporters.”
“Our key point is that a wide range of election outcomes still are in play at this late stage, given that voting intentions are softer than in the past, and U.K. polls often are wide of the mark.” This may affect the pound, ahead of Thursday’s vote.
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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or Contact Us.