Conservatives Victorious, but GBP/USD Eases Lower on US Jobs Data
It’s official – the Conservative party secured enough backing to govern the UK without forming a coalition.
The GBP/EUR exchange rate was largely unchanged as the news was made official as the development had largely been priced into the market.
However, the Pound Sterling to US Dollar (GBP/USD) exchange rate did briefly fall back below 1.54 following the release of the US Non-Farm Payrolls number.
Although the US didn’t add quite as many jobs as expected (223K versus the 228K projection) the US unemployment rate still fell from 5.5% to 5.4% and lent the ‘Greenback’ support.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5407
GBP/EUR Trims Election Gains on UK Trade Data, GBP/USD Trending above 1.54
Although the final result has yet to be announced, both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates were trending in a stronger position as the Conservatives secured additional seats and approached the key 326 level.
However, Sterling’s gains were slightly trimmed as the UK’s trade deficit narrowed by less than expected in March.
Later today further GBP/USD volatility could be inspired by the US Non-Farm Payrolls report.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trading in the region of 1.3738 and the Pound Sterling to US Dollar (GBP/USD) exchange rate was trading in the region of 1.5439.
The Pound Sterling to Euro (GBP/EUR) exchange rate gained by the most for six years overnight and the Pound Sterling to US Dollar (GBP/USD) exchange rate also jumped as the exit poll indicated that the UK will end up with a Conservative-led Government.
GBP/EUR, GBP/USD Exchange Rate News: Pound Sterling Rallies as UK Election Results Come in
With the UK election exit poll showing a surprising distribution of seats, both the Pound Sterling to Euro (GBP/EUR) and Pound Sterling to US Dollar (GBP/USD) exchange rates gained.
The exit poll showed the following distribution of seats:
— Sky News (@SkyNews) May 7, 2015
After weeks of campaigning, political uncertainty and market volatility, the result of the UK general election is almost known – and it doesn’t look as though the outcome is going to be the expected one.
All the latest polls have put Labour and the Conservative party neck-and-neck, raising concerns that the election would result in a hung parliament and lengthy negotiations before a coalition was formed.
If the Tories get the 316 MPs expected, David Cameron will have enough seats to head up a minority government, although he may still need the support of the DUP or Lib Dems. That being said, as the results continued to pour in, the forecast for the Conservatives was positively revised to 324 – just shy of the 326 majority figure.
Whether Cameron takes charge alone or with support, markets appear to be celebrating a continuation of the current austerity measures and another five years of Conservative leadership.
Pound Sterling to Euro (GBP/EUR) Exchange Rate News: UK Exit Poll helps Sterling Surge against the Euro, Will the Gains Last?
The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by 2% immediately following the publication of the exit poll – Sterling’s most impressive advance against the common currency since 2009 – and largely held these gains as more results became known.
The GBP/EUR exchange rate advanced to a high of 1.3822.
Concerns relating to the Greek bailout situation had previously seen the Pound to Euro currency pair trading in the region of 1.3526.
Expert Opinions on the Exit Poll, UK Election Result and its Impact on the Pound…
One Investec economist noted; ‘If correct, this would mean that the Tories have done much better than expected (and Labour and the Lib Dems a lot worse), with the Conservatives actually increasing their seat tally from 2010. Hence the Tories would be very close to an overall majority and would be there with the help of the remaining Lib Dems.’
Strategist Nick Parsons stated; ‘This was dramatic and unexpected. The markets’ worst fear was for a Labour-SNP coalition and if this poll is correct, we will get a continuity government that will be stable. The only caveat is the prospect for an EU referendum in 2017, but that is way, way over the horizon.’
Similarly, market analyst Chris Beauchamp stated; ‘Crucially, Mr Cameron is expected to still be short of a majority, but it looks like any putative anti-Tory coalition will have a harder job on its hands blocking any Queen’s Speech authored largely by the Conservatives. The effect on financial markets was electric. A strong Conservative element to the next government sends the message that the economic policies of the past five years will continue, removing concerns about an early end to austerity.’
Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast – Poor US Non-Farm Payrolls Report Could See ‘Cable’ Extend Gains
The unexpected exit poll saw the Pound Sterling to US Dollar (GBP/USD) exchange rate leap more than 1.5%, with the pairing achieving a high of 1.5522.
The GBP/USD exchange rate had previously been trading in the region of 1.5242.
While the shockwaves from the UK general election result will continue to impact currency market movement in the hours ahead, the Pound Sterling to US Dollar (GBP/USD) exchange rate is likely to fluctuate further in response to the US Non-Farm Payrolls report.
This highly-influential employment data is expected to show a solid US jobs increase in April.
However, this week’s US ADP Employment Change report fell short of forecasts and some industry experts believe the NFP number could disappoint.
If that proves to be the case, the Pound is likely to consolidate and extend earlier gains against the ‘Greenback’ and Cable could hit 1.56 before the weekend.
The Pound Sterling to Euro (GBP/EUR) exchange rate was trending in the region of 1.3806 the Pound Sterling to US Dollar (GBP/USD) exchange rate was trending in the region of 1.5488 the Euro to US Dollar (EUR/USD) exchange rate was trading in the region of 0.7228 and the US Dollar to Pound Sterling (USD/GBP) exchange rate was trading in the region of 0.6447