The markets have been relatively volatile over the last few weeks due to the upcoming General Election- and with opinion polls coming out on a daily basis with different results- I thought now would be a good time to start looking at possible outcomes for the election this month.
But before we look at that, it’s important to take a look at what happened in the 2017 Election.
As you can see, GBPEUR was comfortably trading at 1.20 when the election was announced- the market steadily dropped to 1.15 by the time election day came around due to opinion polls, and by the time the votes had been counted and a hung Parliament was announced, we were sitting at 1.13.
This is a drop of over 5% from the announcement to the result, which means that a transaction of 500,000 Euros would have cost £20,000 more to purchase if someone had waited until the election result.
Back to this election- right now it seems that opinion polls are favouring a Tory majority, which from an exchange rate perspective would mean at least 1.20 for GBPEUR and upwards of 1.30 for GBPUSD, which would be fantastic- however, at this point, how much can we trust opinion polls?
Many analysts still see a hung parliament this year, which would mean weakness for Sterling, as it would mean more Brexit delays and further volatility for the UK market. Quite simply, these sort of events are impossible to predict.
So how do we manage our exposure in these situations? First of all, it does come down to your budget and affordability, if you are looking at exchange rates right now and think it’s the right price for you, then it is probably worth buying something at current rates so you have something locked in- maybe even look at a forward contract.
However, many of you may want to buy at a particular rate, i.e at 1.20 on GBPEUR, in which case you can set a “Limit Order” which will automatically purchase your amount at that rate if it hits, even if it is at 2am!. On the flip side, if it starts to drop, you can set a “Stop Loss” at a lower rate, i.e at 1.15 to ensure you don’t buy anywhere lower than that.
If you would like further information, or if you have a particular rate you are targetting please don’t hesitate to contact me this week for a consultation about your requirements so you are best positioned for the result of the election.