What impact could the UK general election have on the pound?

But how could the vote impact the pound? And what does this mean if you need to move money abroad?

Although the currency market generally hates uncertainty, the pound reacted positively to April’s surprise announcement from Prime Minister Theresa May regarding her plan to hold a general election on 8th June.

Sterling surged after May’s unscheduled speech and largely extended gains over the weeks that followed.

While the GBP/EUR exchange rate fell from its best levels of €1.199 as a result of French political developments, GBP/USD advanced from $ 1.237 to an eight-month high of $ 1.298, GBP/AUD surged from AU$ 1.648 to AU1.763 (its strongest levels since last September), GBP/NZD soared from NZ$ 1.782 to NZ$ 1.886 and GBP/CAD achieved C$ 1.783.

This movement had a significant impact on international money transfers.

For example, £100,000 would have been worth AU$ 164,800 before May’s speech but AU$ 176,300 after – a difference of AU$ 11,500. 

So why did news of an early UK election send the pound higher?

PM Theresa May had previously stressed that no election would be held until 2020. Her change of heart might have been unexpected, but it was viewed as having a potentially positive impact on the UK’s Brexit negotiations.

As it stands, the Conservatives are expected to win by a landslide in June.

Current polling averages indicate that the Conservatives will take 46.7 per cent of the vote, with Labour a distant second at 28.8 per cent. 

The Lib Dems, UKIP and the Green Party would be left with 9.8 per cent, 6.9 per cent and 2.8 per cent respectively. 

Some experts anticipate that the Tories could take as many as 56 seats from Labour.

A greater Conservative majority would mean less parliamentary opposition to the Brexit-related proposals put forward by the government, which could pave the way for a smoother exit from the European Union.

Subsequently, a decisive Conservative win in June is likely to give the pound a boost, potentially sending GBP exchange rates surging to their best levels since the EU referendum last June.

However, no matter how certain something seems, there are no guarantees in life (as we learnt in 2016 with the shock results of the referendum and US Presidential election).

If there is a sudden surge in support for the Labour party and Jeremy Corbyn manages to dethrone Theresa May, UK Brexit negotiations could be thrown into disarray – temporarily at least – and concerns that Britain may not secure the exit deal that over half the population wanted may leave the pound reeling.

A coalition would have a similar, or worse, impact on the pound depending on which parties are left to form one and how long the process takes.

If you need to send money abroad in the near future, a win for the Conservatives would help you get more foreign currency for your pounds, while any other outcome could make your pounds worth less.

Keep track of the latest currency news in the build up to the election if you want to time your currency transfer effectively and get the best possible return.

Daily Express :: Personal Finance Feed


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