How Would the Election Affect the British Pound?

Posted by Allison on 11 May 2015, 09:38

Welcome back to another report, and this time we have some drama to focus on as the General Election has the power to affect the British pound and its value. Let’s see how it would fare.

An overview of the currency markets for May 4th – May 8th 2015

The week of the UK General Election dawns, with what could potentially be serious consequences for the British pound. Indeed, as the week began with the pound on 1.5432, we saw a severe dip on that day alone. By Monday night it had fallen to 1.5113 against the US dollar, losing over 2% of its value in the process. The next three days saw marginal increases each time thankfully, but still there was clear uncertainty over the outcome of the election and how this would affect the country and trading as a whole. Fortunately the result – and the lack of a hung parliament – meant the pound bounced back considerably on Friday night. It moved back from 1.5225 on Thursday evening to 1.5413 on Friday.

Would the same pattern be true against the euro as well? The pound started the week on 1.3760 and again lost ground on day one, falling to 1.3552 here. It did improve a little on Tuesday, rising to 1.3605, but then it lost ground again by falling to 1.3557. With a low point on 1.3468 on Election Day itself, the pound then soared back to 1.3736 on Friday, almost as good as it had started with.

Moving on now to Hong Kong, the pound started on 11.961 here before experiencing the same drop on Monday as it had elsewhere. Here it meant it sank to 11.717. Fortunately the next four days were much better, although the improvements we saw up to Friday were cautious to say the least. The big improvement was on Friday itself, as the pound jumped back to 11.950. Again this meant it finished up slightly under its starting rate for the week, making back most of its losses in the process.

We were familiar with a dip on day one by now, so seeing the same happen against the New Zealand dollar isn’t exactly a surprise. The pound began on 2.0265 before falling to close out Monday on 1.9958. It then experienced the same improvements through the rest of the week against the Kiwi dollar as it had against the Hong Kong dollar. However in this case the improvements were significant. By Friday evening the pound was sitting pretty at 2.0721.

Could it round off a dramatic week with something similar against the Australian dollar? The opening exchange rate here was 1.9486 and again it had a bad opening day, falling to 1.9278. By Wednesday it had dropped further to 1.9021 which turned out to be the worst things would get. A slight improvement to 1.9105 on Thursday laid the way for better news on Friday as the pound finished with relief on 1.9479. This left the performance against the New Zealand dollar as by far the best all week.

Notable events in the world of currency

Another similar pattern against the Canadian dollar

Here the pound began on 1.8549 before dropping back to 1.8284 midweek. Finally it bounced back to close on 1.8655.

Some drama against the Swiss franc

The pound started on 1.4429 before dropping to a low of 1.3929 on Thursday night. It then recovered to 1.4265.

More drama against the Icelandic krona

Here we began on 202.522 before dropping to a low – again on Thursday, Election Day – of 198.212. We not only recovered we managed to achieve the best rate of the week on Friday as we finished on 203.027.

So all in all the British pound had more than its share of drama this week. Thankfully we had some great news by the end of it as the pound managed to recover from its dramas. While it did not recover all its losses in many cases, it did do enough to settle things down.