How will an election affect exchange rates?

By Matthew Boyle

As global conflict escalates, storm Henk batters the British isles and Luke Littler darts mania subsides in the UK, it has been a relatively quiet week on the currency market.

As the New Year begins, a quiet week of data combined with continued seemingly tentative markets have seen exchange rates remain flat.

This was highlighted as UK house market and mortgage data was released yesterday morning – whilst surprisingly positive, GBP gains were minimal, and no sooner had we seen the Pound gain a third of a cent against the Euro and half a cent on the Dollar these gains were quickly erased, seeing rates return back to levels seen at market open.

The currency market in 2023 was a year dominated by central bank intervention fighting to combat inflation. Dominated and led by the US Federal Reserve and a Dollar that whilst benefiting from its safe haven status as military conflict wages on, exported much of its own inflation woes across the globe.

As for 2024, the market landscape appears no different. Sunak and the government pat their backs as inflation was halved throughout the year, and as support for Starmer and the Labour party continues to grow, the opposition leader’s suggestion that Sunak and the Tories are currently squatting in government will strike true with plenty. Sunak has suggested a general election will happen in the second part of the year, but the question is can he and the Conservative government last that long?

We know that political uncertainty is damaging for currency rates and with the Pound around 1% off the best Euro buying rates we have seen in 9 months, global and domestic uncertainty growing now could well be a good time to remove the risk should you have an upcoming transfer to make.

This morning we see Eurozone inflation figures released in what looks like the first real data release of note this year, ahead of next week when markets will be back in full swing. As the global markets begin to chunter back into full pace focus will once again return to inflation and eyes back to the central banks as they wrangle with interest rates to solve the issue.

Speak to us at A Place in the Sun Currency today should you have an upcoming transfer to make and would like to explore the various options we can offer to help you remove the risk of your costs increasing ahead of the markets returning to full swing next week and what looks to be an uncertain year ahead.