Eve of general election sees pound on remarkably strong form

The pound has been surprisingly calm in the final countdown to the election, making steady advances yesterday.

GBP/EUR started this morning trading at €1.1523, GBP/USD at US$1.2974, GBP/AUD at AU$1.7176, GBP/NZD at NZ$1.7992 and GBP/CAD at CA$1.7517.

It’s going to be a busy day on the currency markets today. Scroll down to find out why the election might not be enough to sink sterling during the day...

What’s been happening?

Sterling ended the day on remarkably buoyant form yesterday considering it was the eve of the election. Some of this was due to weakness in other currencies, but GBP was even able to ignore some disappointing new growth forecasts.

The Organisation for Economic Co-operation and Development (OECD) did raise its GDP outlook for 2017 from 1.2% to 1.6%, but left its prediction for growth in 2018 at 1% even though it raised its expectations for growth in many other countries.

Additionally, the OECD claimed that the UK government needed to borrow more money and invest more in infrastructure. This is a pretty notable departure from the norm for the OECD, which previously supported George Osborne’s austerity measures.

The US dollar was on lacklustre form yesterday, allowing GBP/USD to climb 0.4%. With so many high-impact events on the schedule today, economic data was of little interest yesterday.

GBP/EUR was also able to record strong gains on the back of rumours that the European Central Bank (ECB) was preparing to cut its inflation forecasts. Markets had been expecting signs of optimist from policymakers, so this was a considerable surprise.

What's coming up?

What isn’t coming up?! The UK heads to the polls today, which is likely to keep the pound on soft form over the coming hours until the exit polls start coming in. There are bound to be some rumours that push sterling one way or another until the results begin to be announced late in the night and early tomorrow morning.

The US dollar and euro may have trouble capitalising on what should be a prime opportunity to appreciate against the pound, as they both have their own risks to worry about.

For USD it’s the testimonial of former FBI Director James Comey, who is due to appear before the US Senate intelligence committee at 15.00 UK time. His words could potentially cause yet another political scandal for President Donald Trump.

Meanwhile, those interested in the euro are now expecting bad news following yesterday’s ECB rumours. This further heightens the already concrete odds that ECB President Mario Draghi is likely to say something pessimistic in his post-meeting press conference and send the euro tumbling lower.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.