Pound to Euro rates hit multi-month highs with snap-election call
PUBLISHED: 11:36 10 May 2017
Theresa May’s announcement of a snap general election came as a surprise to most people and caused the GBP/EUR exchange rates to hit multi-month highs, but what can we expect during the campaign?
Theresa May surprised us all and kicked the currency markets into high gear very quickly after the slumber of the Easter period with her announcement of a General Election in the UK on 8 June, which was later agreed upon in Parliament.
In the 36 hours following the announcement, a £200,000 transfer would have achieved more than €7,400 extra on a well-timed currency exchange.
The General Election and the Pound
Elections always tend to bring fairly unpredictable exchange rate movements, and they are rarely small jumps or drops. The potential for serious policy U-turns is exaggerated in this election due to the repercussions these could have on the status of the Brexit negotiations.
This was why the Pound trended so well in the immediate aftermath of the announcement. It is not the simple case that markets prefer the Conservatives, but the general consensus is that a Conservative majority will improve the UK’s negotiating position.
For one, we will finally have an elected Prime Minister with a mandate of national majority to proceed with the negotiations in the best interests of her country. Similarly, an election now guarantees this strong footing for 5 years in the negotiations, rather than a messy change of power in between. Whilst the talks are scheduled to last two years, it is common knowledge that this timeline is incredibly ambitious… so this additional guarantee is a relief for future confidence in the UK.
Though in the final weeks in April the Pound has still seen net gains, so what can we expect moving forward?
How to safely secure currency during an election cycle:
We will be seeing heavy campaigning in the UK throughout the month ahead of the June election. In this time the only information financial markets will have to work with regarding these currency defining events will be polls.
True polls can be trusted about as far as they can be thrown these days, however, these are still good for indications, and financial institutions (who’s trading drives currency market movement) will work with what they can. As a result, currency rates will be shifting alongside the national mood, which has proven to be very changeable in recent years, particularly with the anti-establishment vote thoroughly underrated in the EU Referendum and the recent US election.
With such a fluid landscape in place a premium is put on being an informed purchaser and being able to move quickly should any tempting exchange rates emerge. The role of a currency broker is to keep you informed of any favourable currency movement so that opportunities are not missed, or that concerning trends are dealt with quickly. This limits your exposure to coming home from work and being ‘caught out’ from currency movements earlier that day.
Similarly you can eliminate risk by securing an exchange rate ahead of time for a future requirement by utilising a forward contract. This is effectively a buy-now-pay-later policy, which allows you to guarantee an exchange rate for up to 18 months with just a small deposit.
You can download a free guide to secure currency in the run up to the UK election here.
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Learn more about Foreign Currency Direct plc at: www.currencies.co.uk