Sterling vs Euro Hits New 31-Month High, as Markets Forecast Tory Win

Will GBP/EUR Rates Rise or Fall Ahead?

The sterling vs euro interbank exchange rate stands at 1.1860 today at the time of writing. This is its strongest since May 11th 2017, or 31 months.

One reason why the pound to euro interbank exchange rate has reached this 31-month high today, is because the financial markets are increasingly confident that the Conservative Party will win a majority at next Thursday 12th December’s UK general election.

According to the world’s money managers, there’s now a 70% chance that the Tories will win a majority of MPs in Parliament, up from 65% earlier this week.

In part, this is because a variety of polls suggest a victory for Prime Minister Boris Johnson’s party. For example, according to the Britainelects, Financial Times and BBC “poll of polls”, the Tories stand 10% ahead of the opposition Labour Party, at 42% to 32%. So the higher probability of a stable UK government next week has lifted sterling.

GBP to Eur Rises, as Decisive UK Election Result Could Resolve Brexit Faster

For instance, Kim Mundy, a foreign exchange strategist with CBA, says that “Opinion polls suggests that the Conservative party is on track to win a majority at the 12 December UK general election and this has underpinned GBP recently.”

Meanwhile, Neil Wilson, Chief Market Analyst with Markets.com, says that “The dam has burst and a considerable amount of pent-up demand has been unleashed – the market seems to be betting that the Tories have an unassailable lead.”

In general, markets want a single political party to win next Thursday’s UK election, because it’s thought that this will resolve Brexit faster, while creating certainty for British businesses, thereby supporting the UK economy in 2020.

Sterling May Be Affected, by Risk of ‘Hung’ Parliament, Further Brexit Delays

However, looking to the week remaining until the British public goes to the ballot boxes, the GBP to EUR interbank exchange rate could be influenced.

In particular, if the polls start to show that the election won’t deliver a decisive result, in which case there may be a ‘hung’ Parliament, sterling might be impacted.

This is because, in a ‘hung’ Parliament, no single party has a majority of MPS to pass laws. This may extend the UK’s Brexit uncertainty beyond the current January 31st deadline, so could be worth watching for, at the election results.

If you would like to learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.