Last week was pretty eventful for the pound as UK economic figures - namely inflation data - failed to impress traders and caused sterling exchange rates to fall. This alongside strong figures for Europe kept GBPEUR exchange rates around the 1.16 area for the week. The exception was the GBPUSD exchange rate which managed to reach the key level of 1.30 for the first time since September 2016, which is great news for people converting sterling to purchase dollars. The GBPUSD forecast is still for the rate to continue going up, due to the lack of confidence in the US President (Thanks, Trump) and with the Fed unlikely to hike interest rates in June, it all points in the upwards direction for cable.
With economic data in the UK currently underperforming, many sterling sellers are hoping for the upcoming UK general elections to put a boost into the pound, so let’s take a look at that situation… Currently, investors and pollsters seem to be pretty certain that Theresa May will continue as British PM and keep a strong majority in the House of Commons- and this would be seen as strong for the pound. Theresa May has been very up-front about going for a “hard Brexit”, and EU leaders have been equally up-front by saying they will not make negotiations easy for her, so I am struggling to see why this would be good for sterling at this point.
On the other hand, we have Jeremy Corbyn, hated by the media, seen as no competition by opinion polls, but the people seem to love him (sounds a lot like the Brexit vote to me…), he would look to go for a softer transition with regards to Brexit, and has also stated that he would look after everyone (both those who voted remain and leave) which seems very amicable to me and the EU seems to welcome this notion. Currently, it seems that the value of the pound would fall if we saw Jeremy Corbyn win this election, and as it would put uncertainty into the market, I understand. However, if we look at his stance on Brexit, long term this could be good for the pound.
I have no idea who will win this election, and this post is about currency, not my political views, I just like to look at both sides of the coin and explore all possible scenarios, it seems that nobody is factoring in a possible Corbyn win, which is concerning for me, as it seems he will take pretty much most of the youth vote - which could swing this election. My guidance on this is not to bank on any party winning, but protecting yourself with financial tools; political events make the market very sensitive, and it is never worth the gamble.
Onto this week, we have no noteworthy UK figures out until Thursday - so until then we will see strong data releases from Europe and slightly weaker releases from the U.S - so until Thursday at least, It looks as if that the GBPEUR rate will stay between 1.15-1.17, and the GBPUSD rate could hover further above 1.30.