CURRENCY EXCHANGE: Euro rises after far right loses French election

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.

Last week the focus was on the French as the nation voted for the next President. Much like Nigel Farage during the last UK General Election, Marine Le Pen was ultimately full of hot air that, when it came to the voting public, had a relatively poor showing in the final outcome. Le Pen’s Far Right connections and policy changes embedded within her manifesto failed, meaning that Emmanuel Macron will be sworn in as France’s youngest president.

In his victory speech Macron told his fellow countrymen that France had turned a new page and spoke of “hope and renewed trust”. He has appeared to galvanise a country that was becoming divided in opinion over social reform and immigration policies. His appointment has also cemented the European Union, which was nervous over the result. Macron is a major player in the euro game and he has comforted the single currency this week.

Market analysts were expecting his appointment to strengthen the euro as Le Pen would have weakened the currency significantly. Luckily, the market seemed to have fully priced in Macron’s victory so the reaction to the rate was minimal.

The week was light on data until Thursday when the Bank of England voted to keep rates on hold, again. On what is known as ‘Super Thursday’, the quarterly inflation report was also released and the Bank’s growth forecast for the coming months. It was the latter that made the market react most.

During these post-Brexit times of uncertainty, the pound seems built on no significant foundation of strength. When we seem to doing well, the smallest negative can see the market set to tumble. The Bank of England warned that that consumer spending will be squeezed and that economic growth is likely to be slightly lower that previously forecast. The adjustment from 2.00% growth to 1.9% has sent the pound down from €1.1920 to 1.1780 in the last 24 hours.

For those of you that would like to protect yourself against the downward trend are well placed to protect yourself against this market moving down further. We’re getting closer to the UK election, and although it does seem that we’ll see a landslide for the Conservatives and suggestion that the result will be closer between Corbyn and May might hurt the pound further.

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.

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