With Labour divided over Brexit, the Conservative Government is seen as the stronger party for the snap election in June. Whether this will lead to Pound strength is yet to be seen, but given that previous elections cause major volatility for the currency in question, those will a foreign currency requirement should consider their options sooner rather than later. The below table highlights exchange rate movements for a number of currency pairs:
|Currency Pair||% Change||Difference on £200,000|
When Theresa May called a snap election on the 18th April, the Pound soared against all of the major currencies and hit a 6th month high against the Euro. The reason why the Pound reacted in a positive way is that the market (investors) feel that Theresa May’s conservative party will win a majority and therefore the Prime Minister will have more power when negotiating Brexit terms with EU officials.
However cracks have already started to appear for the conservatives and the Prime Minister may not have it all her way as she first thought. Theresa May released a statement earlier in the week stating that Brussels are trying to interfere in the UK’s election. The Prime Minister is referring to the claim that the UK may have to pay €100bn to divorce from the EU. In addition the PM went on to criticise Jeremy Corbyn and stated “trust me, not him” and also stated “If we do not stand up and get this negotiation right we risk the secure and well-paid jobs we want for our children and our children's children too”.
These claims seem to me like the PM is already making excuses and blaming EU officials and the statement against the opposition seems like a similar strategy by former PM David Cameron and Chancellor George Osborne which was labelled ‘project fear’. If Theresa May continues to make these claims, I believe this could put pressure on her campaign and therefore she may not win a majority and have to form a coalition after all.
For clients purchasing a foreign currency and are thinking that the recent trend will continue the closer we are to the election, I would encourage them to think again. Past history tells in the run up to an election the currency tends to devalue as volatility increases and investors get the jitters.
If you are purchasing a foreign currency before the election I would recommend getting in contact with your trader to discuss your currency pair and to formulate a plan now as I believe Sterling weakness is on the horizon. Call our trading floor on 01494 725353 or email me here to get a quote.
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