Election day arrived on the back of a positive session for the pound, which recorded gains over both the US dollar and the euro.
Voters up and down the United Kingdom will march to the polls on Thursday (for those who haven’t already voted via post), with many predicting a historic defeat for the Conservative party. Will Keir Starmer be Prime Minster this time tomorrow? Can Reform and the Liberal Democrats eat into the Tory heartlands? Today is the day we find out.
Sterling climbed by a quarter of a cent and three quarters of a cent against the euro and the US dollar respectively. The euro also performed well, with EUR/USD gaining half a cent.
It wasn’t just electoral exuberance that sent the pound up yesterday. US ISM services PMI for June badly undershot expectations, coming in at 48.8 versus May’s 53.8. That helped to depress demand for the US dollar, which will see less action today as a result of the July 4 celebrations.
Last night, FOMC minutes from the Federal Reserve showed that most policymakers agreed that inflation was slowing. However, there was little appetite for immediate action, with the notes advising against committing to a data for the first rate cut until more data came in.
UK services PMI fell from 52.9 in May to 52.1 in June, as per the latest study from S&P Global. The fall was actually significantly less than had been predicted, as easing cost pressure helped avoid the expected outcome of 51.2. The report noted that many businesses continued to adopt a ‘wait and see attitude’ ahead of the election.
So, back to all things election. Yesterday, even senior government ministers were using words like landslide, which perhaps doesn’t reflect well on its overall campaign. According to some insiders, a host of high-ranking representatives, including Rishi Sunak, were said to be fearful of losing their seat.
If Sunak were to lose the vote in Richmond and Northallerton, it would be quite extraordinary. No sitting Prime Minster has lost their seat in British electoral history.
As you may have seen, our team will be burning the midnight oil this week to make sure your next transaction is protected. More volatility is likely over the coming days, and while we don’t wish to go all tabloid with an election day plea, our advice will always be to let us manage your currency risk. It’s days like today that underscore our point.
Make sure any upcoming transactions are protected against the risks of sudden market movements. Secure a fixed exchange rate now with a forward contract; call your account manager on 020 7898 0541 to get started.
