By Kian Songra
In the early hours of this morning, the polls concluded to witness the much predicted result, in that Labour has claimed a landslide win, coming into power for the first time in nearly 14 years. Keir Starmer has won back the British public’s trust, cruising to a victory of 410 seats, up 210, celebrating a landslide victory for the first time since Tony Blair in 1997. Rishi’s reign comes to an abrupt end with the conservatives losing 249 seats, with the biggest shock in Wales where the party has been wiped out of all its seats. The Conservatives’ collapse has not come to much of a surprise off the back of losing the faith of its voters, especially after the Covid era including the Boris Johnson’s partygate scandal. Rishi’s battle was one to minimise the losses in his party.
Today’s official result has been much anticipated with early YouGov polls results, giving a clear insight ahead of the main focus of today’s result. Investors are to have priced this into action in the market before this official announcement, so the market was completely numb to the 10 pm exit poll announcements. Both GBP/EUR and GBP/USD are unchanged this morning, with those predicting large movements in the market on the back of the announcement to come as a shock.
Historically with Labour policies involving higher public spending and taxes, this tends not to bode well for the pound and any new government is no guarantee of stability. For those with sterling in hand with upcoming euro or dollar requirements it could be worth removing any variables by looking at our various payment options to fix your currency ahead of your requirements. Potential economic uncertainty and any perceived change tend to result in increased trading volatility with the possible impact being the euro clawing back the recent losses on the pound.
The French election is what the market will be turning their attention to when the results come in on Sunday. As per the first round of votes, the polls predict that the far-right party will win the greatest number of seats with Macron predicted to come third. The market concerns will linger with a potential hung parliament being considered and so the euro could see increased weakness, as this is seen as instability for the eurozone. Therefore, the GBP/EUR rates may continue to hover around the 2-year highs, however as the uncertainty remains the rates could see increased volatility should this not be the outcome. Those with currency requirements coming up should look to get in touch with your currency consultant to remove the risk of uncertain times for both big political changes here in the UK and over in France.
Remaining data today
Today we have a range of key data releases, that could cause increased volatility in today’s trading session. Retail sales for the EU are released at 10 am with a predicted increase on the previous negative reading of -0.5%. Economists are speculating that retail sales will increase by 0.2% and so this could cause euro strength, however, this could be only a limited effect as the news and noise of the election result dominates the market movements. Investors will also be scrutinising the ECB president Lagarde’s speech, into any comments about her take on the eurozone’s near term outlook.
GBP/USD is fighting back into the high end as the Greenback broadly recedes on Thursday. Market volumes are drawn tight with US exchanges shuttered in observation of the US Independence Day holiday, and Cable traders found little reason to head for the hills after UK Parliamentary Election results came in broadly as expected. Non-farm payroll and unemployment figures are ones to look out for the Non-farm payroll, which measures the level of employment, historically causes increased volatility if the reading were to come out of line with the 190k expected result. This was seen in last month’s reading where the figure was a lot stronger than predicted and so the dollar gained 0.5% on the pound. Unemployment is set to stay unchanged at 4%, but any reading higher could cause dollar weakness.
Over in Canada, the unemployment reading is released with a predicted to stay at 6.2%, recording their highest level since October 2021, so those with Loonie requirements could look to gain from the announcement, as sterling continues its strengthening trajectory since the start of July.
With Labours Majority win, its policies will have different impacts on the pound as so with those with sterling in hand may look at minimising any variables. This will be clearer on the true extent of the impact on the rates as time progresses but keep a close eye on Sunday as the French election result will look to impact the rates heading into next week. Consider the various payment options we offer to mitigate any risk, due to heightened uncertainty and so it is best to stay in close contact with our friendly team to gain some guidance on your upcoming purchases.