Sterling volatility expected in lead up to general election
The pound to euro exchange rate looks set for a volatile 6 weeks after it was confirmed last night that a UK general election will be held 12th December. A vote in the House of Commons resulted in a huge majority of 418 supporting a general election after eventually finding support from the opposition Labour party. Labour leader Jeremy Corbyn said his party would “now launch the most ambitious and radical election campaign for real change our country has ever seen.” Elections in the UK add a layer of political uncertainty and the pound has often fallen in recent elections.
Expect high volatility for GBP vs EUR exchange rates in the weeks to come as the markets begin to speculate as to what a new government may look like. Whilst Boris Johnson is generally ahead in the polls, this election is almost impossible to predict with the Brexit consideration and the events or non-events of the last 3 ½ years. If this election is largely about Brexit then the outcome becomes difficult to predict. The Liberal Democrats and Scottish Nationalist Party are seeking to cancel Brexit altogether whilst Labour seeks to remain in a customs union but also to hold a confirmatory second referendum.
Those looking to buy or sell euros are likely to see volatility in the run up to the election but also after the event depending on which government is formed and whether or not there is a hung parliament. It would be wise to consider planning around all the latest developments to avoid potential disappointment. The outcome is likely to be established Friday 13th December. Expect a hugely enthusiastic campaign in the meantime.
Eurozone consumer confidence
EU consumer confidence data is released this morning although the markets will be more concerned with tomorrow’s Gross Domestic Product Data. The EU continues to struggle with weak growth and low inflation and a weak number will only put more pressure on the European Central Bank to take action at the next meeting. Christine Lagarde will take over at the ECB at the next meeting so it will be interesting to see the course of action she pursues in light of the pressures that the EU economy currently faces.
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