Currency Market Update - 3rd July 2024

Less than 24 hours until election day

With Brits set to vote tomorrow, what does it mean for the Pound?

We tend to avoid politics and we were going to keep quiet but this information may help some of you...

Most analysts think a landslide victory for Labour will be the most positive outcome for the Pound.

That’s because it would provide greater political stability and potentially improved UK-EU relations.

You would expect a Labour victory is already priced into the Pound.

So tomorrow is more about the size of the majority and any unexpected results from other parties.

Following the initial market move, we expect investors will want reassurance that a Labour government will be fiscally responsible and keep spending fairly tight.

If Labour were to start a spending spree it would likely cause the Bank of England to delay interest rate cuts – the first of which is expected next month.

We all know from the 49 days that Liz Truss was in office, investor confidence matters.

All being well in the UK, there will still be volatile times ahead as the French and US elections get underway. This will obviously impact GBP/EUR and GBP/USD.

Central banks are struggling to provide much forward guidance this year.

The US Federal Reserve, the big daddy of them all, was expected to make 6 interest rate cuts in 2024, now it looks like it could be only 1.

It’s a good indication of the uncertainty in markets.