EDITOR’S NOTE: Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks at the factors driving the pound’s exchange rate in the week gone by.
The Tuesday after a bank holiday weekend often makes me feel tired and longing for the end of the day. Not much tends to happen as traders get their feet back under their desk and shake the DIY cobwebs away. This Tuesday was quite different however.
Theresa May strolled purposefully a few steps outside the black door at Number 10 and stated that a snap-general election would be called to ‘unify the country’ and stop the inner political fighting that we’ve seen since the Brexit vote. On the surface, I didn’t expect this to be too market significant as it seems a one horse race with Mrs May leading the pack, who are languishing behind. A landslide victory from her Conservative Party will allow her to implement the hard Brexit that she’s been touting since coming into office.
Deposit this threat, the pound has finished the week at the highest rate we’ve seen in six months. The market, it seems feels satisfied that a unified government and settled Westminster is better for the country and is a comfort to the economy. I fully expect the dust to settle after the initial spike upwards but for now there is quite an opportunity to take advantage of!
I’m asked constantly when a move like this takes place; ‘how high do you think it may go?’ the reality is no one knows. We’re all experts in what happened yesterday of course. This weekend creates more uncertainty with another round of voting in the French elections. Marine Le Pen, the National Front leader stands a realistic chance of being elected. If she gets through this round then she’ll be a frontrunner on 7th May.
Le Pen’s rhetoric has been toward France following the model set by Brexit. If this is the case then you are likely to see the Euro soften further which will leave the market better for any buyers out there.
More news on the French and British elections will be available when we get it. Campaigning will begin soon and the usual merry-go-round in opinion polls may have market influence. Expect volatility, and keep your currency expert close for live updates.
This article is written by a foreign-currency broker working for TorFX, a forex broker established in 2004 to provide foreign exchange and international payments to both individuals and companies. TorFX is authorised by the Financial Conduct Authority under the Payment Service Regulations 2009 for the provision of payment services. Their FCA number is 517320. To verify their authorisation, you can visit the Financial Services Register and search the register using their FCA number. SPI is not responsible for the opinions of guest contributors.