A Flextension and a General Election

4 November, 2019

Grace Rae

Grace RaeLast week saw rates continue to trade fairly flat as the anticipated October 31st Brexit deadline came and went. And the EU announced a 3 month postponement to January 31st 2020, which provided some relief as there were fears of a much shorter extension. The House of Commons also said goodbye to John Bercow who after 10 years in the chair as Speaker the words “order, order” will be passed on his successor who will be voted in by MP’s over the course of the day.

In the week ahead, there are a few events to note which could have an impact on exchange rates. First thing this morning UK Markit Construction PMI is expected to marginally improve from 43.3 to 44 and at 15:00 the US post MoM Factory Orders. In the early hours of Tuesday the Reserve Bank of Australia post their latest interest rate decision and rate statement although they are not expected to cut rates any lower which is good news for the Aussie Dollar. UK Services PMI is due at 09:30 on Tuesday which is forecasted to show a rise from 49.5 to 49.7 and anything higher could be Sterling positive, so worth making note of. The US also post Trade Balance, Markit Services and non-manufacturing PMI in the afternoon. On Wednesday its the Eurozone’s turn for October’s Markit Services PMI and September’s Retail Sales figures in the morning and US Nonfarm Productivity in the afternoon. The Bank of England post their new forecasts in their Quarterly Inflation report on Thursday as well as posting its latest Interest Rate decision which is expected to remain unchanged at 0.75%. And lastly on Friday Canada post October’s Unemployment Rates and Average Hourly Wages data.

Market focus has now shifted from Brexit to December’s election, and this week we can except the Pound to be driven by various opinion polls as party campaigning begins. The latest poll suggest a conservative lead so far, and from a currency point of view, the larger the conservative lead, the better for the pound as a majority win means the Prime Minister can pass his deal without any obstruction, removing the fear of a no-deal Brexit. That being said, it’s important to remember the elections have barely even begun. Polls could still shift before December 12th and a hung parliament could still be a very real possibility. Hung Parliament = significant uncertainty = Sterling pressure.
Back in the 2017 election, the Pound fell just over 6 cents against the Euro over the course of 2 months due to a hung parliament. Could you afford a loss like that on your upcoming currency transfer should the same result happen again?

With Sterling currently at the best levels in 6 months against the Euro and Dollar, it could be sensible to get your funds secured before the election really kicks in and rates start moving. Give Currency Index a call and speak to one of our currency consultants. We can talk you through the various options we provide to help you lock in your currency to best suit your needs.