The potential implications of the May election on sterling
Since the beginning of 2015, there have been numerous political and economic factors that have had a positive effect on sterling – especially against the euro. Last week, the GBP/EUR hit 1.40 for the first time since late 2007 – a great rate for all British buyers looking to purchase property anywhere in the Eurozone. After all in late 2008, when sterling was practically on a par with the euro (GBP/E UR: 1.03965, December 2008), a €300,000 property would have cost a British buyer £288,558. At today’s rate of 1.3869, that same amount would cost a British buyer around£216,309 – a saving of over £72,000.
Of course, nothing is ever a certainty in currency markets – and we are about to enter a period of political uncertainty in the UK, which is likely to have a negative effect on sterling.
May 7th’s UK General Election is likely to be one of the most unpredictable in recent history, with experts forecasting a hung parliament of some kind when voting closes. This may consist of a Conservative coalition, a Labour coalition, a minority win, or even a vote of no-confidence – which would then require a new set of elections. Much of these expectations come from the perceived surge in support for smaller parties, which in turn points to a wider than usual dispersion of votes – making it highly unlikely that either major party would be able to achieve a parliamentary majority.
We know from previous elections – and indeed last year’s Scotland referendum – that sentiment in the run up to, during and after the actual voting is likely to have an impact on the currency. The spotlight on the UK economy will undoubtedly have an effect on the strengthening or weakening of sterling.
Of course, any change in sterling’s strength will affect its rates against other currencies, meaning that individuals will be able to afford more or less international funds for their sterling. It’s therefore really important to minimise your risk on international transfers in advance, and protect yourself against the possibility of unfavourable exchange rates.
If you have any international transfers coming up in the next few months – why not give Smart Currency Exchange a call today? Your allocated trader can keep you updated on any market movements that might affect you and talk you through the products we have available that could protect you from fluctuating exchange rates.
If you know you have a big international transfer to make around the time of the UK election, why not book it now at today’s excellent rate? You can then relax in the knowledge that no matter what happens you will be protected from any weakening of sterling. Click here for a quote.