Sterling has benefited from a struggling euro and could surge further in coming months
The exchange rate is sitting at €1.140, after reaching a 10-week high earlier this week.
Sterling has benefited from a struggling euro, and could surge further in coming months, according to experts.
Both currencies have proven extremely sensitive to political events in the Eurozone and UK in recent months.
This was proven most recently in the Germany election at the weekend, when Angela Merkel’s party delivered its worst result in 70 years.
The euro plunged in response to the shock outcome and amid concerns over increasing support for far-right anti-immigration group Alternative for Germany (AfG).
Pound euro exchange rate: Sterling could benefit from Eurozone election uncertainty
Uncertainty surrounding two looming elections in the EU could spell disaster for the euro, consequently boosting the exchange rate for the pound.
On Sunday Catalonia will vote on whether to split from Spain – even though the referendum put on by separatists has been branded illegal by Spanish authorities.
A Catalan vote for independence could send the euro plunging, as the risk of Spain breaking up and splitting the Eurozone grows.
Kathleen Brooks, research director at City Index, said: “If the Catalonia referendum goes ahead we expect this to be a disruptive event for the euro, with the potential for a sharp decline of up to five per cent initially in the single currency if the separatists win.”
Pound euro exchange rate: Catalonia will vote on independence from Spain on Sunday
Meanwhile in Italy campaigning is due to start imminently for an early 2018 election.
This presents a great threat to the euro due to insurgent anti-euro forces in the country, as well as its fragile economy.
Yesterday the exchange rate failed to rise significantly despite encouraging data out of the UK.
But figures out of the Eurozone today could boost the rate.
Pound euro exchange rate: Sterling is buying €1.140
Laura Parsons, currency analyst at TorFX, said: “The UK’s CBI retail sales figures smashed forecasts on Wednesday (with the reported sales index jumping from -10 to 42 in September) but that failed to stop the GBP/EUR exchange rate edging away from its recent 10-week high.
“Although the euro was unsettled by the news that German finance minister Wolfgang Schäuble is stepping down from his post, the pound still eased to €1.136.
“Today’s German inflation data could give the euro a boost against Sterling if it shows a surprise uptick in inflation in September.
“Conversely, a disappointing CPI stat would be euro-negative.”