Article 50 has now been triggered. Where next for GBP/EUR? (Daniel Johnson)

GBPCHF Exchange Rates Reach Highest Levels Since Mid-March

Sterling Undervalued?

I have been writing blogs on several websites for some time and although I do not always get it right, I called this one. The triggering of Article 50 was already factored into GBP/EUR buoyancy levels. The market moves on rumour as well as fact as yesterday’s event shows. Despite the uncertainty surrounding trade deals I am confident we will slowly see Sterling rally against the euro as trade deals become more apparent.

Potential Euro weakness

I think the Euro could well be in for a rough year. There are two general elections on the cards within the Eurozone this year. Historically, political uncertainty weakens the currency in question. First up is France, the election is due to commence on 23rd April. Marine Le Pen, the head of the National Front does have the potential to win despite a decline in the polls. Keep in mind how wrong polls have been of late, Brexit and the US election can be used as examples. The silent vote is key and can cause big swings in results. This is controversial, but I think many have big issues with immigration but are not prepared to voice their concern, however when it comes to slipping a a folded piece of paper into a ballot box, it is an opportunity to influence immigration laws without anyone being the wiser.

If Marine Le Pen gets in she has made it known she will be holding a referendum due to her strong far-right views on immigration. We have already witnessed the damage caused to a currency when a referendum is on the cards.

Later in the year, we have the German election where a similar situation could occur. Also keep in mind the problem that will not go away, Greek debt.  I am confident Sterling will strengthen over the Euro long term.

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