Pound exchange rates could recover if Tory polling figures improve

The latest election news remained the main driver of Sterling exchange rates on Wednesday, with GBP fluctuating in response to recent polls.

GBP/EUR slumped to a low of €1.1432, GBP/USD recovered from $1.2783 to $1.2912, GBP/CAD bounced back from C$1.7193 to C$1.7447 and GBP/NZD advanced to NZ$1.8237 from NZ$1.7999.

Keep reading to find out what we can expect from the currency market today...

What’s been happening?

Concerns about the outcome of next week’s UK general election have been the main catalyst for pound movement so far this week, with wildly different polling figures indicating that the resut could be far tighter than anyone expected.

Sterling initially slid yesterday as a YouGov poll implied that the Conservative party could actually lose seats on 8th June. When campaigning first kicked off PM Theresa May was commanding a decisive lead against Jeremy Corbyn. But the distance between the two candidates has narrowed dramatically and this sign that we could actually be left with a hung parliament next week put the pound under pressure.

However, the pound later recovered losses against some of the majors as two separate polls gave the Conservatives a 10 and 15 point lead against Labour.

The euro, meanwhile, was left fluctuating following the release of mixed data from the Eurozone. Although the rate of unemployment in the currency bloc dropped to 9.3% (an eight-year low) the rate of inflation slowed significantly.

The easing in consumer price pressures reduces the odds of the European Central Bank (ECB) making any changes to monetary policy in the near future.

The pound was also able to strengthen against the Canadian and New Zealand dollars despite positive developments for both currencies. Over in Canada, Q1 annualised growth data came in at 3.7% - less than forecast but a massive improvement on the previous figure of 2.7%.

In New Zealand upbeat commentary from the Governor of the Reserve Bank of New Zealand (RBNZ) wasn’t enough to stop the pound clawing back around a cent against the New Zealand dollar.

What’s coming up?

Today the UK will be publishing its latest manufacturing PMI report.

The index is expected to show a decline in manufacturing output in May, with the gauge easing from 57.3 to 56.5.

Manufacturing contributes far less to total economic output than the services sector, but this confirmation that the UK economic slowdown continued in the second quarter of 2017 could send the pound lower.

It will take a dramatic change in the polls for the pound to stage a lasting recovery in the build up to the election.

If the Conservatives are able to claw back a strong lead over Labour, it will ease concerns that the UK election could add yet another layer of uncertainty to Brexit negotiations.

But Theresa May’s absence from a televised debate between the major party leaders saw the Tories come under fierce criticism on Thursday and a YouGov poll published by The Times now puts the Conservatives just 3 points ahead of Labour.

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.