There are just two days to go until perhaps one of the most important elections in recent UK history, which will have a huge impact, no matter which political party you’re aligned with.
How will the potential outcomes affect currencies?
The general consensus in the markets is as follows:
Tory Majority (polls currently suggest a 38 seat majority)
Sterling strengthening by 3-5%, although some of that will have already been priced in.
Hung Parliament (no overall majority)
A sell-off in the Pound of 2-3%.
A sell-off in the Pound of 5%, possibly more.
Market analysts predict the interbank rates could move considerably – here is a summary of those predictions:
|Currency pair||Tory Majority||Hung Parliament||Labour Majority|
|GBPEUR||1.22 – 1.25||1.15 – 1.16||1.10 – 1.12|
|GBPUSD||1.35 – 1.38||1.28 – 1.30||1.24 – 1.25|
|GBPAUD||1.98 – 2.02||1.88 – 1.90||1.81 – 1.83|
|GBPNZD||2.07 – 2.10||1.96 – 1.98||1.89 – 1.91|
|GBPCAD||1.79 – 1.81||1.70 – 1.72||1.64 – 1.66|
This also would apply to other GBP currency crosses, such as GBPZAR, GBPCHF, GBPAED, GBPSAR, GBPQAR, GBPMXN, and so on.
What can I do to protect my international payments?
Over the last few years, the polls have been pretty inaccurate (Brexit, US election, last UK snap election) although the YouGov poll was the only one to accurately predict the last election result and that has predicted a 55-65 Tory majority this time around.
With so much uncertainty over the result, it’s worth making the point that you can elect to convert all or just some of your funds before Thursday night. A cautious ‘averaging’ strategy is an eminently sensible option, so give us a call before Thursday night if you wish to get something in place and reduce your own risk and risk for your business, if you are making international payments for your company.
Don’t forget you can also use automated orders to target a particular rate and there is no cost to do this. It can be a great tool to achieve good rates in a volatile market, or to protect against the adverse effects of an unexpected result.
Good luck and get in touch if we can help you between now and then.