If you follow the foreign exchange rates at all, you’ll know that one of the biggest influences on the rates in recent years has been the Eurozone debt crisis. The euro has come under a lot of pressure, as doubts about the economic viability of its members as well as the currency itself gain ground. However, with the French presidential election in full swing at the moment, that influence on the foreign exchange rates has decidedly increased.
The euro has weakened to 20-month lows against the pound this week, as the likelihood of Socialist candidate Francois Hollande taking the Elysee Palace from incumbent Nicholas Sarkozy rises. The reason this possibility has damaged the euro is plain: Hollande rejects the spending cuts program that has formed the political consensus in Europe of late, throwing the future direction of the continent into doubt. Whereas Mr Sarkozy pulled as close to German Chancellor Angela Merkel as he could, Hollande intends to strike a note of discord, observing that what is good for Berlin is not necessarily good for Paris. Political uncertainty is hence afoot in Europe, making it a less attractive place to put funds. Hence euro weakness.
Of course, the future of France isn’t set in stone. There is still a fortnight or so before the second round of the election, and Nicholas Sarkozy (a seasoned campaigner) could yet secure a surprise win from his less-charismatic opponent. Were this to happen, it would help the euro to rise, as Sarkozy is less likely to rock the boat where Europe’s economic future is concerned.
I do hope that answers your question. Of course, if you have any other questions about changing currencies, feel free to Get in Touch. One of our dedicated dealers will be delighted to provide an in-depth personal response to your query.