Sterling Update: Pound Stays Particularly Strong

Here’s the latest currency news from our partner Moneycorp, to help you find out what your money is worth.

GBP

The pound has stayed particularly strong recently, with UK interest rates expected to remain “higher for longer”, but the markets are still currently pricing in an interest rate cut to 5.00% on 1st August.

At the start of this week, the pound’s gains over the past two weeks have started to recede, but we should find a floor at 1.1800 on GBPEUR and 1.2650 on GBPUSD.

This week also marked the penultimate week of campaigning ahead of the General Election on Thursday 4th July. The last week was mired by ongoing reports into election data betting by people linked to Rishi Sunak or the Conservative party.

According to the latest polling data on 27th June, the Labour Party is leading the race with 40% of the vote, followed by the Conservatives with 20% and Reform UK with 16%. According to the Telegraph’s election predictor, that uses the latest polling data to forecast results for each constituency, the Labour Party could walk away with 452 seats, leaving the Conservatives with 83. This dramatically different from the last election when the Tories, under Boris Johnson, won the election with 365 seats.

In terms of significant economic events this week, the Bank of England’s Governor Andrew Bailey spoke at a press conference about the Financial Stability Report on Thursday. Bailey hit back at criticism that the Bank of England’s loose monetary policy during the pandemic had caused the cost-of-living crisis.

Bailey said: “The headline is that, even if we had had the benefit of full hindsight in the run-up to the war in Ukraine, and ample advanced warning – which for the record we did not, no one did – then in order to keep inflation at around 2%, we would have had to raise Bank Rate well into double digits, sending unemployment much higher than it is today, and we would have had to do so in the middle of the worst pandemic in more than a century.”

EUR

After a relatively quiet week this week, the first round of French Parliamentary Elections are being held on Sunday. This is the first of two rounds of elections that are taking place following President Macron’s call for a snap election earlier this month.

The election is being describes as the most consequential in decades. As it stands, in two weeks France could have a far-right or a far-left government or be stuck in political deadlock.

The president himself is not up for re-election, with his second term due to end in 2027, but he could be forced to appoint a Prime Minister from another political party if his centralist alliance loses its majority.

Currently, Marine Le Pen’s hard-right National Rally party is ahead in the opinion polls for this Sunday’s election. The second round on 7th July is less predictable because of France’s complex voting system. For a candidate to win their seat outright this weekend they would have to win a majority with a turnout of over 25%. Most seats don’t have such a clear-cut winner, which means all candidates with a share of more than 12.5% of the vote stand in the second round.