Pound to Euro Exchange Rates: How Could a Conservative Majority Help Boost Sterling?

Pound to Euro Exchange Rates: How Could a Conservative Majority Help Boost Sterling?

The pound to euro exchange rate has continued to trade over 1.16 on the interbank level since 11th October and is now consolidating it’s moves within a 1.16-.1.17 broad range.

The market’s assumption at this stage is that a Conservative majority will be the outcome of December 12th general election and that a swift and orderly Brexit will follow. A general analysis of the Polls by Business Matters magazine shows that 42% of voters currently favour the Conservatives, compared to just 29% for Labour, 14% for the Liberal Democrats and 3% for the Green Party. The margin of favour between the two main UK political parties (Conservatives and Labour) is enough to provide a significant appetite for the Pound that has been missing for some time.

General Election TV Debate: Polls Indicate Unconvincing Win for PM Johnson

Boris Johnson and Jeremy Corbyn went head to head on Tuesday evening in their first televised debate and although the polls are heralding an unconvincing win for Johnson at 51% v 49% opinions are divided on several issues. Johnson was seen as a clear winner on the ‘big issues’ within the global arena including Brexit and government spending. Corbyn however, pushed in front with the emotional ‘buy-in’ on being trustworthy, the NHS, and being in touch with ordinary people. The question is, will the UK vote with their heads or their hearts?

Pound to Euro Forecast: Sterling Gains on Conservative Majority

Investor’s will remember that the opinion polls suggested a Leave result in the EU referendum in 2016 and this will likely impair the pounds moves above 1.17 with key resistance sitting at 1.1750.

It is easy at these rates to forget how aggressively the value of the pound has improved since it’s summer 2 year lows of 1.07 on August 12th and euro sellers should proceed with caution if waiting for the election results in the UK. Many commentators agree (ING/Morgan Stanley) that a win for the Conservatives could see the pound gain to the 1.20+ levels so a decision to hold now can only be based on a risky assumption that Labour may win the public vote. In comparison, euro buyers will do well to remember that forex markets often ‘buy on a rumour and sell on a fact’ so these forecasts could be slightly overbaked if a clear Conservative win is on the cards.

From Europe tomorrow Christine Lagarde will deliver her first speech as European Central Bank President on Friday. Since becoming ECB President at the start of November, Lagarde has not yet expressed any views on the future of monetary policy, but is expected to do so during this speech. There are some big questions to answer around her inheriting a deeply fractured governing council, divided by the recent reintroduction of quantitative easing. What lies ahead for the ECB?

For more information or to discuss a currency requirement you can get in touch on +44(0)1494 360 899 to discuss these factors in more detail with myself, Lauren Buckner, or you can leave me message using the form below.