The Pound Sterling to Euro (GBP/EUR), Pound Sterling to US Dollar (GBP/USD) and Pound Sterling to Canadian Dollar (GBP/CAD) exchange rates all jumped on Friday as it appeared the Conservative party would be remaining in power with potentially a clear majority win.
Our forecast now 329 Con 233 Lab
— Laura Kuenssberg (@bbclaurak) May 8, 2015
Earlier… The Pound Sterling to Euro (GBP/EUR) exchange rate was trading significantly higher on the day of the UK general election, while the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in a tight range as investors weighed the possibility of a disappointing US Change in Non-Farm Payrolls stat emerging on Friday.
Credit Agricole commented on the UK general election and the impact on Sterling, saying: ‘The FX markets should welcome a Conservatives win especially if their current coalition partners–the Lib Dems– win enough seats to preserve the status quo. At the same time, GBP could weaken in response to a Labour win especially if they have to rely on the SNP to form a government. We suspect that such an outcome should fuel fears about another Scottish independence referendum and weigh on GBP.’
All the final polls are in: 1 2pt Lab lead 1 1pt Lab lead 5 ties 4 1pt Tory leads So a dead heat. They’re all right or all wrong.
— Sam Freedman (@Samfr) May 7, 2015
Investors in the Pound Sterling, Euro and US Dollar have been kept on their toes in recent weeks as the UK general election approached, Greece continued to negotiate its austerity deal with its creditors and the US economic recovery appeared to be in a slowdown.
UK General Election Causes Major Pound Sterling (GBP) Exchange Rate Volatility
Let’s start with the UK general election; the prospect of a political shakeup if a new government takes over or the vote results in a hung parliament could see the Pound Sterling (GBP) exchange rate fall significantly. Moreover, the Pound (GBP) could continue to trend lower for weeks on the prospect of political uncertainty in the general election aftermath. The UK’s economic recovery has already been hindered in the run up to such an influential vote, with several areas of the economy reporting a marked slowdown.
But voting day is finally here and the Pound’s tentative wait is nearly over! If the Conservative party remain in power it’s highly possible that the UK economy will be offered a kick-start and the Sterling exchange rate could rally.
Greek Government Ponder Referendum ahead of IMF Repayment – Euro (EUR) Exchange Rate Sensitive
Meanwhile, the Euro (EUR) exchange rate isn’t so lucky, with some experts suggesting Greek talks could limp on until July. Greece is dangerously close to running out of funds and the possibility that the nation may default on its May 12th €800 million International Monetary Fund (IMF) debt repayment is a very real threat.
However, progress is being made since the Greek government implemented a political shakeup, booting finance minister Yanis Varoufakis to the sidelines after months of painful and fruitless discussions.
“We work in perfect harmony,” says @yanisvaroufakis of shakeup of #Greece bailout negotiating team
— Peter Spiegel (@SpiegelPeter) May 7, 2015
Friday’s expected to see the Greek government meet to decide on whether a referendum will be offered to the people after creditors put their final offer on the table.
US Dollar (USD) Exchange Rate Forecast to Sink on US Non-Farm Payrolls and Economic Slowdown
And what about the mighty US Dollar? After months of dominating the market on the back of strong US domestic data and Federal Reserve interest rate hike prospects, the US Dollar’s strength is coming undone at the seams as weakness in the US economy emerges and a slowdown seems to be underway.
Friday’s going to be a major day for the US Dollar (USD) exchange rate with the US Change in Non-Farm Payrolls and US Unemployment Rate stat due for release.
This week’s ADP Employment Change stat came in at 169K in April rather than the 200K forecast. The figure boded badly for the upcoming US payrolls stat and the US Dollar (USD) exchange rate was offered little support.
Strategist Roy Teo commented: ‘The market is focused on whether the recent weakness in jobs data will continue into the coming months.’
UPDATE: Thursday’s US Continuing Claims printed favourably coming in at 2.2M in the week through April 25th, while the Initial Jobless Claims figure registered 265K rather than the 279K forecast.
Pound Sterling to US Dollar (GBP/USD) and Euro (GBP/EUR) Exchange Rate Election Forecast
It’s expected that the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates will weaken as Thursday progresses. However, if the Conservatives remain in power the Pound Sterling (GBP) exchange rate could jump in Friday’s European trading.
The Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.5416; the Pound Sterling to Euro (GBP/EUR) exchange rate is trading at 1.3746.