UK Braces Itself for Election Day – How will GBP/EUR Rates React to the Result? (Matthew Vassallo)

GBP/EUR rates have remained marooned under 1.15 during Wednesday’s trading, ahead of tomorrow’s UK general election.

With recent polls suggesting the Corbyn led Labour party have gained some momentum, the key question now is what is the likely result and how with the markets react to the final outcome?

Whilst the result seems to be more uncertain over recent days, the Pound did find some support earlier this week. It gained over a cent against the EUR following a tough run over the past week.

The markets have been gearing themselves up towards tomorrow’s key vote and it has been the election and the subsequent outcome, which has been shaping GBP/EUR exchange rates over recent weeks.

Investors had clearly factored in a Conservative majority victory but since reports of a 20-point lead last month, each subsequent poll has indicated a decreasing advantage. This in turn has caused investors to panic, with the result being a sell-off of large Sterling positions and a downturn in the Pound’s value.

I’m extremely wary about pre-election polls, especially after last year’s UK referendum and US election results. However, with strong indications that a hung parliament is now a very real possibility, are you prepared to gamble on the result if you have a short-term Sterling currency exchange to mate?

Personally, I feel that the Pound is fighting an on-going uphill battle and any short-term improvements should be protected wherever feasible. Even a strong Conservative victory will only boost the Pound back to the levels we saw a couple of weeks ago, which have already proved unsustainable over recent months.

Looking beyond Thursdays vote and the UK economy still has many issues to content with. The Brexit negotiations have not even started and seemed to have hit a wall, whilst UK growth forecasts for next year and beyond have shrunk.

I still feel based on current market conditions that the downside risk outweighs the current upside gains and for this reason I would be removing as much risk as possible from the current market.

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