EDITOR’S NOTE: Things change fast in currency markets. A week ago the Pound was riding high on the back of a commanding Conservative lead in the polls. Then came manifesto blunders and the terrorist attack in Manchester, raising security concerns and election jitters, which have driven down the Pound. Luke Trevail, a currency exchange specialist at forex brokers TorFX, looks in more detail at the factors driving the pound’s exchange rate in the week gone by.
The news this week has been rightly dominated by the news from Manchester. The markets have reacted negatively to the attack on hundreds of innocent concert goers on Monday evening, where 22 deaths and many more injuries have been suffered at the hands of Salman Abedi.
The market was ,like the rest of us, fairly numb in the days immediately following the attack, but in the last 48 hours or so Sterling has suffered a slump downwards, a huge move from the highs of €1.19 seen earlier in the month to €1.1350 as I write.
Amongst a lack of fundamental data in the UK, the pound has started to worry that a second attack is imminent and the effect of this to the financial services industry cannot be ignored. The UK terror threat remains at ‘critical’, which is the first time we’ve been on this type of alert since 2013.
If we can move beyond the terrorist activity and threat, the market has also started to react to the Labour Party beginning to claw back the deficit enjoyed by Theresa May’s Conservatives since she announced the June 8th General Election. Her U-turn on social reform was met with frustration, confusion, and lack of credibility, and the undecided voters apparently now less likely to vote for her. Conversely Corbyn has tapped into the younger voter. Social media is alight with support for ‘uncle Jezza’, and the absence in turnout from this key demographic in previous elections might be the deciding factor in this snap election in just less than a fortnight’s time.
A hung Parliament is now being spoken of, the Tories teaming with the SNP, or Labour and Lib Dems creating a coalition? Who knows, but both are viable and realistic possibilities.
The market has invested its belief in a Conservative majority, once again it may have got it wrong, and in this case you would expect to see Sterling slump further. Those of you wanting to protect yourself against the uncertainty of the coming weeks are well placed to try and do so.
Fingers crossed, hope for the best, and have a great weekend.
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.