With the electoral votes in, a hung parliament is now set to be Britain’s future, for the short term at least.  Liberal Democrats’ leader Nick Clegg acknowledged they have had a ‘disappointing night’ and with Labour and the Conservatives both unable to win outright, recent predictions have indeed proved accurate.

Pound Sterling – UK Market

Friday

The Pound has lost ground today against most major counterparts.  As a hung parliament appeared to be on the brink of occurring, the GBP/USD sank to a one-year low at 1.45; there is no guarantee that it will stop there. Furthermore, the strong GBP/EUR rates observed over the past couple of days were, as we thought, more to do with the weakness of the Euro rather than the strength of the Pound.

As was mentioned yesterday, today has made the picture a little clearer and we will undoubtedly get a better idea of the state of play as the day’s events unravel.

Thursday

Yesterday saw a lot of Euro buyers take advantage of the strong Sterling to Euro rate. It looks set to continue today. At 12:30 the GBP/EUR rate reached 1.18121.

The strong GBP/EUR rate over the last couple of days has overshadowed the fact that there is still some uncertainty hanging over the Pound.

Some predict a Tory victory, although a hung parliament is still a strong possibility. If you are concerned about how the election will affect your foreign exchange, speak to one of our brokers today.

Wednesday

The markets have opened this morning with the best GBP / EUR exchange rate for Euro buyers since August 2009 which is extremely significant given that we may be about to enter a period of uncertainty given tomorrow’s election. GBP / EUR was trading at 1.16921 today at 10am. To buy your Euros today or fix a rate for future use, speak to your broker.

The GBP / EUR rate has moved in this manner due to extreme weakness in the Euro and therefore may be clouding the true state of the Pound. However, the Pound has also been strengthening against its most-active counterparts. This has been partly attributed to some poll suggestions of a clear Conservative majority win this week rather than a hung Parliament situation. However, this could also be down to a short-term pre-election surge in the Pound. It’s a cliff hanger situation.

An additional issue on the horizon is that as countries in the Euro-zone experience credit rating downgrades, the UK must be cautious. Whichever party forms the UK Government will have to contend with the possibility of Britain losing its AAA grade credit rating.

Tuesday

Sterling’s movement has been relatively subdued so far this morning following the bank-holiday weekend with Sterling slipping only slightly against the Dollar. This may be due to market participants being wary of taking strong positions on Sterling ahead of Thursday’s election.

Today there will be a release of UK data from the Bank of England including the M4 Money Supply measuring all Sterling in circulation, Mortgage approval statistics and UK Net Lending for March. There will also be figures released on UK manufacturing figures and consumer credit.

Nigel Hodges www.currencysolutions.com