Latest Euro to Pound Exchange Rate Scenarios on Today's Election Outcome

A surging Euro was hit by a reality-check today as European Central Bank President Mario Draghi took a surprisingly cautious tone in his post-meeting statement, choosing to overlook an improved growth picture and instead focus on lower inflation.

With the ECB out the way, markets can now focus exclusively on the upcoming release of UK General Election results.

The Euro to Pound exchange rate remains the pair most of our readers are interested in on election day and we continue to receive a steady flow of insights on where the currency pair might head over coming hours.

Analysts at TD Securities have obliged us by providing their forecasts on potential election outcomes on EUR/GBP.

These scenarios are outlined below.

Large Conservative Majority

Firstly, only a strong conservative majority of over 40 seats will strengthen Sterling.

This view falls in line with those of other analysts who view the 40-50 mark as a golden level.

In such a circumstance EUR/GBP is likely to fall from its current level (in the 0.86s) to an initial station at 0.8525 and then 0.8300.

TD Securities rate the chances of this happening at 20%.

Small Majority

A Conservative win with a small majority, defined as below 40 seats, would actually see the Pound weaken as fears the far-right of the party would have too much say in Brexit negotiations increased the possibility of no-deal and a hard Brexit.

In such a scenario EUR/GBP would initially probably rally to a key support and resistance level at 0.8855.

TD consider this as the most likely outcome at 45%.

Hung Parliament

A hung parliament will have a similar outcome to a small conservative majority but probably be even more Pound-negative due to the increased uncertainty.

In such a scenario TD see EUR/GBP rising to 0.9025 temporarily before falling back down to 0.8855.

TD estimate a 20% chance of a hung parliament.

Labour Win

A Labour win will probably result in a small labour majority given Labour has never led even one of the polls in the run up to the election so a sweeping majority is highly unlikely.

If Labour win, the Pound will depreciate even further, according to TD, falling to as low as 0.9142 potentially -  but then pulling-back quite quickly to 0.8855.

TD see a 15% chance of Labour winning.

Not all analysts are bearish for Sterling in the event of a Labour win, however, those at Deutsche Bank see a possibility of the Pound appreciating on the back of such an outcome.

Labour's economic agenda may also provide support for Sterling, according to advisory service Capital Economics, given its emphasis on public spending and infrastructure investment; both of which could result in hgiher growth.

The conservative budget is much more fiscally tighter in contrast.

Pound Chugs Along into Results Night

Sterling favoured the bottom of a narrow overnight range against the dollar with currency players on the sidelines awaiting today’s flurry of action.

The pound could raise the roof of its range if Theresa May can hang on to power and do so with a stronger majority in parliament that gives her more clout to call the shots on Brexit. Any shock outcome could leave the pound vulnerable.

It’s critical for Britain to get its political house in order ahead of June 19, the day Britain and Brussels are expected to start formal Brexit negotiations that could take years to hammer out.