Euro is down against the pound this morning, as the latest election polls in the UK show a widening lead gap between the Conservatives and Labour. It comes after several more positive days for the euro, making gains on the back of a perceived increase in the probability of a hung parliament in the UK. There was also a group of good manufacturing data releases yesterday morning. Although the eurozone saw its tenth month of contraction in the sector, it was at the slowest rate since August.
Although much political attention is focused on Brexit, there is also growing uncertainty in Germany. The Social Democrat Party surprised observers by electing Norbert Walter-Borjans and Saskia Esken as the party’s leaders, rather than the expected so-called ‘continuity candidates’, the more centrist Olaf Scholz and Klara Geywitz. As the SDP is in coalition with Angela Merkel’s Christian Democrats, this could signal a change of direction towards the left. If this does not sit well with the conservative CDU, this could well weaken the coalition, which already took months of negotiations to form.
