EDITOR’S NOTE: The Pound is still at a seven-year high against the Euro thanks to problems in Greece, but uncertain elections pending in the UK have taken some of the shine of the Pound. Foreign currency exchange specialist Luke Trevail looks at the factors driving exchange rates, and what the near future might hold.
At Easter time we’re full of promise of new life and changes for the better happening seemingly overnight. Tenuously perhaps but this is a good way to look at the currency market.
The euro is clinging on desperately as it weathers the storm created by our Greek friends. The restructuring of their debt and sweet talking of steely Angela Merkel has so far calmed the waters of what still threatens to be a big problem moving forward.
In April the market will not suffer fools lightly, however, with both the Greek situation likely to pull the market one way and the pending UK General Election pulling it the other, as the Euro Sterling tug-of-war becomes more ferocious with numerous factors working against each of them to get the upper hand on the market.
May’s election is already being touted as the closest run for generations, and with the Tories already stating that they will not form another coalition, the threat of a hung-Parliament, and perhaps another election, is a real possibility. This uncertainty will damage the pound, which hates political tensions, so those of you with Euros to buy are well placed to do something soon while we’re still at a near 7 year high on the market.
Those of you that don’t have a crystal ball may decide to cash your chips in soon as we’re trading consistently above €1.35, which has been dreamland for most people for a great number of years. For the gamblers out there, you could do well by sitting on your hands, but be warned that a spin on that final roulette wheel can often work against you.
Chris Nation says:
A final spin on a roulette wheel should be 50/50. unless someone’s cheating. But I think waiting until the dust settles on the UK election gives better odds than that on GBP going back up towards/into the 1.40’s. It’s uncertainty that pulls GBP down but that should clear once the new administration is in office. UK has stable governance. The people are not taking to the streets over any issues – far from it. Whatever the outcome of the election in detail, regarding the standing of the parties, UK plc will continue to do business as usual. There may be sound and fury, signifying nothing much more than the last hurrahs of party ideology, regarding health, education and ‘affordable housing’ but these things are pretty much all that’s left for the Westminster factions to squabble about. The business of the country is largely run from boardrooms in UK and elsewhere and Threadneedle St.
I note that most of the ‘campaigning’ this time is a series of ‘pledges’, each designed to trump the ‘pledge’ of the opposition’s latest ‘pledge’, most of them concerning social issues. EU membership is the elephant in the room but the two main parties will quietly show it the door unless UKIP miraculously turns out to be the deal-broker.
This contrasts starkly with Greece. If the Greek PM and his finance minister back off too far in the face of ‘steely’ Angel Merkel, the people WILL be back on the streets. The Greek problem is miles from any real solution. All that we have at the moment is a lull in hostilities. It is probable – greater than 50/50 in my view – that the worst is yet to come. I hope my hands don’t go numb.