How is the UK election likely to impact USD currency transfers?
Posted by Laura Parsons on June 5th, 2017.
Over the last few years we Britons have taken our love of having something to complain about to new heights. We’ve also been able to really indulge in our other love of queuing by choosing to hold more game-changing public votes than most countries do in a decade.
2014’s Scottish independence referendum was swiftly followed by the 2015 general election, and (thanks to former PM David Cameron’s eagerness to please) that event brought about the 2016 UK/EU referendum.
To the utter shock of Cameron and – in fairness – much of the UK, Britain chose to use the referendum to vote to break from the EU – an action affectionately (for want of a better word) dubbed ‘Brexit’.
The referendum split the country in two, created something of a rift between the UK and the rest of Europe and (initially at least) sent the British currency into freefall.
However, it was clearly felt that the general public might get a bit down in the dumps if there wasn’t more political wrangling to contend with in 2017. PM Theresa May decided to fill this void by backtracking on all her previous pledges and called for a snap general election in April.
The election date was set for 8th June, and if you need to move money between the UK and US you’ve probably noticed that currency transfers have already been hit pretty dramatically by the decision.
When May announced the election the odds of the Conservatives winning by a landslide were solid, so the news actually sent the Pound scuttling to multi-month highs against the US Dollar.
Despite May’s controversial rallying cries of ‘Brexit means Brexit’ and ‘no deal is better than a bad deal’ it was believed that an outright win for the Conservatives would actually improve the PM’s hand during negotiations and lead to a smoother Brexit – hence the Pound’s initial gains.
GBP/USD was able to advance to an eight-month high of $1.30 (great news if you’re sending your hard-earned Pounds to the US) while USD/GBP dipped to £0.76 (not so great if you’re moving money from the US to the UK).
However, bets that the Conservatives would soundly trounce Labour (their nearest rivals) were dealt a blow in early June as opinion polls showed the Tory lead had narrowed from 20 points to 4. This unexpected shift saw the Pound give up much of its recent gains.
But what impact could the UK election result have on future Pound/US Dollar currency transfers?
Well, if PM May has one last dramatic U-turn in her and the Conservatives do come out on top with an impressive margin, the Pound is likely to surge in the short term.
A win for the Conservatives would be a return to the status quo, and while they’re likely to deliver a harder Brexit than some Remainers might like, the prospect of a ‘hard Brexit’ has already been priced into the Pound to a certain extent. This means the Pound has already fallen as a result of ‘hard Brexit’ fears and is unlikely to fall much further on them being confirmed.
However, a narrow victory for Theresa May would be less Pound-positive as it may weaken her bargaining position.
A Labour win, on the other hand, could send the Pound reeling in the weeks following the election. For one thing, the UK would have to get to grips with a whole new Parliament. For another, some are concerned about the prospect that Labour’s desire for a much softer Brexit could turn negotiations on their head and leave the UK shrouded in uncertainty for longer.
By far the worst result for the Pound would be a hung Parliament. Given how much the leading political parties have clashed over Brexit, it may take some time for a workable coalition government to be formed. This upheaval would leave the Pound highly unattractive and could have a serious impact on the UK’s ability to proceed with Brexit discussions as planned.
So, if you need to buy US Dollars with your Pounds, a clear Conservative win could help you get more for your money. Any other outcome could see you get less for GBP/USD currency transfers. Conversely, if you’re buying Pounds with your US Dollars, a hung parliament could be the best result in terms of making your US Dollars stretch further.
However, as the last couple of years have shown, nothing can be taken for granted when it comes to political developments and the currency movement they occasion.
The next few weeks could be tense for the UK so look into your currency transfer options if you want to navigate the uncertain times ahead and get more for your money.
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