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Euro Exchange Rate News: GBP/EUR Exchange Rate Forecast to Fall on UK General Election Uncertainty


The Pound Sterling exchange rate was at a new 7-year high against the Euro and firmer against most major peers on Wednesday; however, in the long term the currency is forecast to weaken as we get closer to the May General Election.

The Pound Sterling to Euro exchange rate hit a session high of 1.3716

With the outcome of the general election in doubt, the Pound is forecast to soften as voting day approaches. The Conservative’s will be hoping that a recent run of positive news on the economy will see voters elect them back into power. Despite the economic picture, other political groups are growing in power as voters grow increasingly angry that the recovery remains unbalanced in favour of the already wealthy. Concerns over the UK’s place in the European Union, Immigration and environment are also issues that are of concern to voters.

The UK economy may be improving but wages remain well below the levels seen since the financial crisis.

‘Are we looking at economic growth, or are we looking at Pounds in your pocket? Never before has it been so distinct in terms of those two factors. Never before have people felt like ultimately the direction of the country and their own direction are going very differently,’ said Katherine Peacock, managing director at polling firm ComRes.

Coalition Likely, Makeup Uncertain

All of the recent opinion polls show that there will not be a decisive winner as up to seven different parties jostle to win support. Recent polls released by YouGov plc, have shown that the Conservatives and Labour to be running neck and neck with support of between 32% and 34%.

The UK Independence Party (UKIP), which is opposed to the UK’s membership of the European Union, has support of around 15%.

This figure is however likely to be gross underestimation due to the amount of anger aimed at the establishment over issues such as immigration and recent political scandals such as the Rotherham child abuse scandal which occurred under a Labour council.  With no out right winner likely from the main two parties, a group such as UKIP could end up in a position that could decide the balance of power.

‘If the polls are right, it’ll be a total mess. Every single vote in Parliament is going to need constant wheedling to get it over the line. You could be having regular confidence votes, with games of brinkmanship on both sides,’ said Rob Ford, a politics lecturer at Manchester University.

The uncertainty created by the outcome of the election will see the Pound come under increasing pressure, as May draws closer.