The Pound to Euro exchange rate has been volatile ever since the general election finished, but a GBP EUR advance may be incoming on Brexit news.
Following the election, the GBP EUR exchange rate fell from 1.1552 to 1.1309 and has traded around 1.1317 since then.
Pound Predicted to Rally if Signs Point to Soft Brexit
As talks continue to try and form an effective UK government, Pound traders are already looking ahead to see what a coalition government will mean for Brexit.
Before the hung parliament was announced, it was assumed that a Conservative majority would raise the chances of a ‘Hard Brexit’, where the UK leaves the EU without a trade deal. On the other hand, such a decision would likely bring greater border control for the UK.
As the Conservatives lost their majority, however, it is now rumoured that a ‘Soft Brexit’ may be on the cards. This is because with a diminished party, Prime Minister Theresa May no longer holds a mandate to play hardball with EU negotiators.
This outlook has been strengthened by Michael Gove, who is now Environment Secretary. Commenting on the possible tone of Brexit talks, Gove has stated that the government needs a ‘maximum possible consensus’ going ahead.
This was interpreted as meaning that the concerns of ‘Remain’ voters will be taken into account, which could mean that a less turbulent Brexit is now on the cards.
If it does look like an economically volatile Hard Brexit has been averted by the election outcome then the Pound may appreciate strongly against the Euro.
Euro Surge Possible on Macron Majority in French Parliament Election
The Euro may be able to advance against the Pound in the near-term, when the second round of French parliamentary elections concludes.
After the first round, polls have predicted that President Emmanuel Macron’s supporters could win up to 75% of available seats, which could make Macron’s newly-founded En Marche party the biggest in French politics.
Such a landslide victory could trigger a sharp appreciation for the Euro, as Macron’s centrist policies are generally considered economically sound and progressive for France.
The second and final round of voting will take place on June 18th, with the results likely being known by June 19th.
Recent Interbank GBP EUR Exchange Rates
At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1315 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8838.
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