Sterling vs Euro Exchange Rate near 31-Month High as Polls Suggest Tory Majority

GBP EUR Exchange Rate: The Week Ahead August 15th

The pound to euro interbank exchange rate stands at 1.1875 today. This is only 0.31% below sterling’s recent 31-month high against the Eurozone’s common currency, its highest since April 23rd 2017, reached this Monday, of 1.1913.

Sterling is supported near its 31-month high against the euro, because markets remain confident that Prime Minister (PM) Boris Johnson’s Conservative Party will win a majority of MPs, at today’s UK election.

According to markets, there’s a 73% chance that the Tories will win a majority of seats, up from 68% yesterday.

In general, the world’s investors want today’s vote to be decisive, so that the UK can finalise Brexit, negotiate its future trade deal with the EU, and work on its domestic priorities like schools and roads.

With this in mind, the seemingly high probability that the Tories will win today is supporting sterling, as Britons go to the ballot boxes.

Kantar and Deltapoll Surveys Point to Tory Majority

Financial markets remain confident that PM Johnson’s party will win today, because the final opinion polls point to a Conservative majority.

For example, Kantar’s last poll puts the Tories at 44%, ahead of Jeremy Corbyn’s opposition Labour Party’s 32%, a 12% lead. Similarly, Deltapoll’s final survey shows the Conservatives 1% higher at 45%, and Labour 2% higher at 35%, a 10% lead.

Historically, a 10% lead has been enough to grant the winning party a working majority in the House of Commons, to pass laws without other parties’ support. So these polls pointing to a Tory win today have supported sterling near this 31-month high.

Sterling Could Be Affected as ‘Hung’ Parliament Risk Remains

However, it’s worth noting that today’s UK election isn’t a foregone conclusion, and some opinion polls show the race tightening. For example, Comres’ final survey puts Labour 3% higher at 36%, within striking distance of the Tories’ 41%.

This raises the risk of a ‘hung’ Parliament, in which no single party wins a majority of MPs. The UK has already experienced this situation under PM Johnson’s current government, and it’s caused Brexit and domestic legislative limbo.

So the possibility that today’s vote might not be decisive, and the Brexit deadlock could continue into 2020, may weigh on the pound vs euro interbank exchange rate today, ahead of Friday morning’s results.

To learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, please contact myself, James Lovick using the form below.