Theresa May has surprised the country and the world by announcing a snap election for the UK on June the 8th. This came as a huge shock to the majority of people, especially since the Prime Minister has repeatedly said that she would not be calling an early general election. Although a politician not keeping their word is no strange thing, it is fair to say that no one saw this coming.
Markets reacted in a big way with the FTSE dropping over 200 points since the announcement and GBP initially losing ground across the board. That is however until the Prime Minister gave a reassuring speech and the Pound bounced back, gaining ground against the Euro and Dollar to settle at new highs of €1.19 (almost €1.20 at one point) & $1.28 respectively. This is due to the fact that the most likely outcome is a Conservative victory and subsequently an improved majority for Theresa May in the house of commons. This will allow her to push through legislation in relation to Brexit with little resistance.
In regards to the election, I for one cannot see anything stopping the Conservative’s from winning. It would be nice to have a credible opposition to them, but sadly it is near enough impossible to work out what the Labour party actually stand for these days, especially in regards to their Brexit positioning. As we are also going into the most important negotiations in recent history (for UK PLC that is), it is vitally important we have a stable government that is economically responsible and will get the best for the people of the UK. Judging by recent events, the markets seem to want a Conservative victory, lets see what the people think!
Will the Pound continue on it’s upward trajectory though?
The immediate mitigating factors that you will have to watch out for in the coming months are:
- The General Election (which will dominate things in the short term)
- French Presidential Election (1st round Sunday 23rd April, 2nd round Sunday May 7th)
- Ongoing Brexit Negotiations – for example; if news comes out confirming that the UK will definitely leave the single market and UK based companies will no longer have passporting rights throughout the EU, the pound will drop (considerably) or the reverse, watch this space closely!
Any one of these events could change the market at any moment and cause currencies to rise or fall substantially. This is one of the most unpredictable times in modern history and is certainly hard to foresee which direction currencies will move. Now more than ever it is important to plan ahead if you are exposed to currency fluctuations.
Whether you are a business trading internationally, a company who purchases stock from overseas or a private individual who is moving abroad, then it is vitally important that you use a currency broker to complete your transfers. They will be able to guide you through transferring money overseas far better than your bank, who will undoubtedly treat you like just another name in their long customer list. Not only that, but the exchange rates a broker offers are far better and their customer service on a completely different level. Have a read of the top brokers Currency Pal recommends here
Some food for thought
A year ago to this day; if you purchased Euro’s with GBP then you would’ve been able to secure a rate around €1.26 now you are looking at around €1.19. On a transfer of around £100,000 then you would be €7,000 better off if you purchased your currency one year ago. You can plan ahead by looking at a forward contract with a currency broker. This allows you to fix an exchange rate for up to 3 years (with some brokers). You will then be insulated from any major currency movements which may occur.