Pound-to-Euro Flat as German Election Results Rattle Markets

– Written by


David Woodsmith

STORY LINK Pound-to-Euro Flat as German Election Results Rattle Markets

The Pound to Euro (GBP/EUR) exchange rate traded within a narrow range at the start of the week as investors assessed the fallout from disappointing results in Germany’s latest regional elections.

At the time of writing, the GBP/EUR exchange rate was trading at around €1.1659, leaving the pairing virtually unchanged from Monday’s opening levels.

The Euro (EUR) struggled to find momentum on Monday after regional election results in Germany raised fresh questions over Chancellor Friedrich Merz’s position and the government’s ability to deliver its economic agenda.

Merz described the ruling CDU’s performance in both Berlin and Mecklenburg-Western Pomerania as a disaster, although he subsequently insisted that he intended to remain Chancellor.

Despite this reassurance, speculation over Merz’s political future has continued to circulate, creating another source of uncertainty for EUR investors.

Concerns over the Chancellor’s position could also complicate efforts by Berlin to implement the structural reforms it hopes will help revive Germany’s lacklustre economic performance.

The Pound (GBP) was largely unchanged on Monday, with a sparse UK economic calendar offering Sterling little in the way of a domestic catalyst.

With the Bank of England’s (BoE) latest interest rate decision already behind markets, there was also limited fresh monetary policy speculation to drive GBP exchange rates.

Sterling investors appeared cautious ahead of Prime Minister Andy Burnham’s first face-to-face meeting with US President Donald Trump.

Some concerns have emerged over whether Burnham’s previous criticism of Trump could complicate discussions between the two leaders.

Near-Term GBP/EUR Forecast: PMI Releases Could Set the Tone

Attention now turns to Wednesday’s UK and Eurozone purchasing managers’ index (PMI) releases, which could provide the next significant catalyst for the Pound Euro exchange rate.

The Eurozone figures will be published first, with the preliminary September PMIs expected to show that private-sector activity continued to expand at a steady pace towards the end of the third quarter.

A stronger-than-expected reading could offer some support to the single currency.

Pound Sterling, meanwhile, could face greater pressure if the UK’s own PMI figures point to a slowdown in private-sector activity during September.

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TAGS: Pound Euro Forecasts