GBPEUR exchange rate begins to fall & How will the UK elections affect exchange rates?

Sterling has remained pretty steady running up to the elections, until today; We have seen the GBPEUR exchange rate fall from 1.40 this week down to the 1.36 area in just 24 hours! To put this in monetary value, buying 100,000 Euros will now be £2000 more expensive than it was on Tuesday!

Now contrary to popular belief, I do not think this move is due to the UK elections, if you refer to my previous article then you will see that we were expecting a heap of weak data out of the U.S on Wednesday in the form of GDP data. The figure came in at 0.2% which was a massive drop from last months figures, and shows that growth has begun to slow down in the U.S, which means that an interest rate hike in June is no longer on the cards. Now what is common with currencies like GBP, EUR & USD is that when one weakens, you will see one of the others begin to strengthen- this is due to the fact that investors are pulling their money out of the weaker economy, and putting it into the stronger economy.

So the reason that we saw the GBPEUR exchange rates fall over the last 24 hours was simply this, the GDP figures released out of both the UK & the USA were both weak, so naturally investors pulled their money out and invested into the Euro- but at the same time we saw GBPUSD exchange rates rise to 1.54 today, and the reason is simple; The UK is a recovering economy, and we have already been warned about a slowing GDP and low inflation levels throughout 2015, so to a certain extent the weak GDP figure yesterday was to be expected. However, the USA have been boasting a strong economy for some time now and have been hinting at an interest rate hike, on the condition of economic data coming out strong- the weak GDP figures have now shown that their economy isn't as strong as they think, and that a looming interest rate hike is impossible for an economy climbing out of a recession.

Now onto the next question on every Sterling sellers mind at the moment; How will the UK elections affect exchange rates? The simple answer to this is that nobody knows, however what we do know is that the current opinion polls are leaning towards another hung parliament and coalition government, and the facts show that the last time this happened that Sterling exchange rates dipped by 3% in a very short space of time. For those of you who are weary about the elections and would like to discuss hedging strategies to protect yourself from any exposure you have on the markets from now until Thursday, then I strongly suggest to email me directly at prem.raja@currencies4you.com or calling me at +44 1322 319 550. Panic buying isn't always the best option, I will take a look at your situation and time scale and we can work together on a plan that will not only protect you from these volatile markets but also save you money in the process!