Will Political Uncertainty in Europe outweigh Brexit fears?

I’ve previously outlined that the average exchange rate between the Euro and the Pound over the past decade has been roughly around 0.80, which simply means 80 pence per 1 Euro exchanged into Pounds. Ever since the Brexit vote was announced clients have been able to trade above this level but whether these favourable levels will remain is particularly difficult to tell, and if Morgan Stanley’s recent predictions (see GBP section) come to fruition then many Euro sellers holding on for further gains may end up regretting the decision to wait.

A Sterling recovery will of course negatively impact the Euro to Sterling exchange rates available to clients, but I think even if the Pound struggles we could see Euro specific weakness tilt the pair back into sub 0.80 territory.

Political uncertainty is likely to be a key factor this year within the Eurozone with a number of previously unpopular, right-wing parties coming to the forefront of European politics as the migrant crises has created divisions in a number of EU members. The trend of these right leaning parties is to go down the ‘Brexit’ route of leaving the EU, reducing immigration and re-introducing their own currencies which is why their popularity could severely impact the Euros value.

When should Euro sellers secure their rates?

Whilst it’s impossible to predict the Euros direction, I think our clients would be wise to be aware and in some cases plan around this year’s key political events, due to the potential volatility and downside to the Euros value.

The Dutch general election is due to take place on the 15th of March and it’s reported that Gert Wilders’ far-right Party for Freedom is in the running although other parties have ruled out a coalition should he win the first round.

The French presidential election will be held on April the 23rd and if no candidate wins a majority there will be a run-off election between the top two candidates on the 7th of May. Marine Le Pen is currently leading some opinion polls in the first round, and her right-leaning Front National party has made their plans to stop using the Euro and re-instating the French Franc very clear.

If you would like to plan an upcoming currency exchange involving the Euro around these key upcoming events, feel free to get in touch with me at jxw@currencies.co.uk. Making us aware of your plans in advance can allow us to keep you updated with sudden price changes.


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