Could Sterling Be Undervalued?

Sterling Rises on Election Day

Sterling has definitely been doing well over the last four weeks vs other major currencies, but this week we might actually see it lose against the euro. The latter half of November saw the pound’s gains slow down somewhat, with concerns the UK could be heading for another hung Parliament.

No overall majority for either of the major political parties could jeopardise the Brexit deal going through, and potentially result in no deal. We also need to factor in the new Speaker of the House of Commons, Sir Lindsay Hoyle, who has replaced John Bercow.

Bercow and Brexit

John Bercow was famous as Speaker of the House of Commons for his strong opinions and unconventional methods of bending parliamentary procedures. He has actually been a crucial part of how Brexit has unfolded in the country, and this made for an interesting interpretation of supposedly the most politically neutral role in the House. Ultimately, one of the key factors in the multiple Brexit extensions was down to Bercow allowing legislation to pass, as well as blocking opportunities for further votes on Theresa May’s doomed Brexit deal.

Sir Lindsay Hoyle’s style has been said to be radically different, with him wanting a return to a traditional style of keeping order in the House, and not influencing Parliamentary decision-making in the unorthodox style we’ve seen from Bercow over the last ten years.

Will the Euro Get Weaker After Brexit?

At the time of writing, the pound to euro interbank exchange rate is at 1.1645. Analysts fear that the markets could be underestimating the General Election risk to sterling.

Over the last 15 weeks, the pound has grown against the euro for the last 11 of those. Recent studies are saying that the pound could decline in the run up to the election, but the euro’s strength might be short-lived.

A Lot Could Still Happen

As the Labour Party released their manifesto earlier this week, they have come under heavy fire regarding their spending plans. The Institute for Fiscal Studies has itself claimed that their spending plans are not credible.

However, Corbyn and Johnson were almost neck and neck following their television debate earlier this week, and tonight they will be joined by SNP leader Nicola Sturgeon and Liberal Democrat leader Jo Swinson for a face off.

If we look back at previously elections, the Conservatives seemed to have a similar lead to now, but at the point of manifesto publications and debates with the other leaders, it started to slip away.

For more information on Euro exchange rates and for assistance in making transfers, then please contact me, James Lovick, at jll@currencies.co.uk.