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UK Election 2024: Pound to Euro Exchange Rate Braced for Jump in Volatility

July 3, 2024 - Written by John Cameron

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The Pound to Euro exchange rate (GBP/EUR) edged above 1.1800 on Tuesday before settling just below this level on Wednesday.

Socgen expects that GBP/EUR can make further headway if there is a renewed break above 1.1860.

The UK General Election is on Thursday with the French second-round parliamentary vote on Sunday.

As far as Thursday’s UK General Election is concerned, a substantial Labour majority appears inevitable.

Rabobank commented; “It is fair to say that from the market’s perspective, this week’s French parliamentary elections are far more interesting than those in the UK.”

It added; “By contrast to the shockwaves being felt in France, UK politics is currently relatively boring. From an investors’ perspective this is a better position. We maintain that GBP will continue its slow grinding outperformance of the EUR in the months ahead. We also see risk that an as expected majority Labour government following this week’s UK general election could be met with a modest relief rally in GBP.

There is, however, the possibility that the Conservative Party will be pushed into third place which would make the Liberal Democrats the official opposition. This would be very significant for medium-term economic direction which would also potentially trigger substantial Pound moves.


As far as France is concerned, at least 200 candidates have confirmed that they will not run in the second round in order to block the National Rally (RN) candidates.

President Macron also stated that his candidates should step aside and vote for the left-wing candidates if necessary.

There was still an important element of uncertainty, especially in bond markets.

The most likely outcome is seen as a hung parliament with the RN falling short of a majority.

According to Rabobank; “A gridlocked parliament may mean that significant changes in policy direction are less likely, but it also implies that France’s already poor budgetary position is unlikely to be fully addressed. This suggests that some degree of friction between Paris and Brussels probably lies ahead.”

ING commented; “We continue to see risks of rewidening in the OAT-Bund spreads, which could curb euro gains even beyond the 7 July second French election round.”

The latest Euro-Zone data recorded a decline in the headline inflation rate to 2.5% from 2.6% and in line with consensus forecasts while the core rate held at 2.9% and slightly above market expectations of 2.8% which provided some Euro support.


According to ECB President Lagarde; We still believe that it's likely to be a bumpy road until the end of 2024.”

On interest rates she added; “It's not a predetermined path it's a step that would be followed by further review of data."

Markets expect that there will be no move in July with a further rate cut in September.

According to Nordea; “All in all, the ECB is patient. We believe in rate cuts at the Sep and Dec meetings, but that will require that the ECB’s baseline inflation projection is confirmed by incoming data.”
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TAGS: Pound Euro Forecasts

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