After the publication of the IHS Markit PMI numbers at the end of last week the pound to euro rate declined on Friday. The figures highlighted that there would potentially be another economic contraction in the final quarter of 2019. This weekend also saw the Conservatives publish their manifesto, which expands more on their spending plans. They’ve played it safe with their policy announcements, with nothing overly controversial detailed.
The pound to euro rate is 1.1653 at the time of writing- a small recovery from Friday’s low of 1.1620. The Conservatives seem to be playing the long game with their policy announcements and for now, maintaining their poll lead. If they keep this up, sterling’s losses could be relatively limited.
Euro Weakens Amidst Shrinking Quarter
The monthly publication of the IHS Markit PMI statistics were disappointing, with both the services and manufacturing sectors having contracted. This can be attributed to concerns about Brexit and uncertainty around the UK general election. The US economy is also slowing down but still growing, with both manufacturing and services reporting an increase. The slowdown is expected due to Donald Trump’s various protectionist policies in place.
Conservatives Publish Manifesto
Markets will be particularly attuned to the opinion polls this week as Boris Johnson launched the Conservative Party manifesto on Sunday in Telford. Former Prime Minister Theresa May infamously launched her 2017 manifesto which was seen as a death sentence to the Conservative’s chances in the election, with her highly unpopular dementia tax coming under media scrutiny.
Compared to Labour’s manifesto, the Conservatives’’ spending would be a fraction of Jeremy Corbyn’s plans, increasing spending by £2.9bn a year by 2023-24. Labour plan to spend £83.9bn over the same time period.
The IFS call the Tories’ plans “very modest”, but we would still see more borrowing and state intervention- with Johnson referring to “one nation Conservatism” in his speech announcing the manifesto.
Mixed Election Polls
The weekend polls were mixed, with the Sunday Times and Sunday Express had the Conservative lead retreating slightly following the leadership debates of last week. However, the Opinium poll for the Observer newspaper put Boris Johnson on a 19-point lead.
Interestingly, a Sunday Times poll put Labour on only 20% in Scotland, obliterating their MPs and leaving them with just one: Ian Murray MP, a well-known critic of Jeremy Corbyn.
It’s going to be an interesting week for sterling, depending on whether the Conservatives can maintain a decent lead against Labour.
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