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Currency Roundup - Pound Sterling Movement Affected by Election Polls

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pound sterling euro forex markets

We are nearly a year out from the United Kingdom’s vote to exit the European Union, known popularly as Brexit. In that time, we have seen the United Kingdom’s currency, the British Pound, take a large hit from which it has never fully recovered. Further complicating the pound’s values this month is recent survey data from Yougov. The Yougov poll suggested a very tight election, causing investors to shy away from the currency and lower its value. Yesterday, pound sterling was the worst performing major currency, falling even to the euro (.5%). This weakening is particularly of note, as the euro has still not fully recovered from its unpredictable election season. Last week ended on a similar note for the British pound, after polling data suggested that the Conservative party is losing their lead.

Euro Slowly Recovers

After months of losses, the euro is slowly recovering and gaining on both pound sterling and the US dollar. Though the euro’s value has been negatively affected by political upheaval, the French election of Marcon has restored faith in the currency for many investors. As a result, in the past few weeks, the euro has been slowly, but steadily gaining as more investors place value on the currency.

US Dollar No Longer Riding High 

After months of highs and gains following the election of Donald Trump, the US dollar's growth has stagnated, even losing out to the euro. 

While the euro benefits from countries moving away from populism, as indicated by the French election, Donald Trump's foreign policy is becoming increasingly concerning to investors, particularly as they have yet to see real evidence of his "pro business' policies. 

While many see the initial gains in the US dollar following the election as driven by faith in Trump, historically the US dollar performs well following the election of any Republican candidate, as can be seen in the US dollar performance following the elections of Reagan, George H.W. Bush and George W. Bush.

In fact, a poll conducted by us here at FXcompared last year suggested this very trend - with a majority of  those polled unconcerned for the value of the dollar should Trump take office.  While some could see those results as being "Pro-Trump" the more likely story is actually that those who understand currency markets know that republicans tend to cause the US dollar to rise in value.  This is because investors understand that republican candidates tend to be pro-business.  Unfortunately, Donald Trump has yet to truly prove how pro-business he is to current investors, so until he does, the US dollar will continue to have slowed gains. 

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