Pound/Euro falls after French Elections

Pound/Euro rates fell sharply on Sunday following the first round of the French Elections. For once the pollsters seem to have got this right, with the result going exactly as expected. Le Pen and Macron will now face each other in the final round of voting in 2 weeks time.

As you can see from the chart below, as soon as markets in the far east opened, the rate dropped 2 cents from €1.1950 to €1.1750. This morning it’s climbed back to around the €1.18 level:

Why has the Pound/Euro rate fallen?

There were fears that the polling would be wrong and that Le Pen might win the election. She’s through the first round, but the reason the rate fell so much was because the result was as the polls had expected. This has eased market worries a little and means that if the polls are right, Le Pen won’t win the next round. This strengthened the Euro significantly and made it more expensive to buy, pushing rates lower.

Will the rate recover?

We did warn last week that with rates touching €1.20 it would be wise to put some protection in place. Clients that put in place ‘Stop Loss’ orders were protected against the sudden drop. Look at the bigger picture though and the Pound/Euro rate is still attractive and is back to where it was this time last week before the UK election announcement. In March the rate was down in the €1.13’s so the current levels are still attractive. Indeed if a client still needs to buy Euros, this weekend’s movements could be an indication of what we’ll see in a few weeks. If the polls are right and Le Pen does not win, expect the Euro to gain even more strength and GBP/EUR rates to fall further.

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