Pound vs Euro: What does the future hold?

The euro has seen better days. Quantitative easing, turmoil in Greece and a slow recovery from recession are just a few factors that have brought uncertainty to the continent. What does the future hold for sterling? It is hard to say due to a high degree of volatility in the market.

Fund manager, Neil Woodford expects that the pound will suffer due to uncertainty surrounding the upcoming election and beyond. "The dollar is strong because there's increasing uncertainty about the world economic order and increasing political uncertainty. 

"Investors always seek the dollar at times of uncertainty. But also the US economy is outperfoming other developed economies around the world.

"Europe is weak principally because of QE [quantitative easing] and the weakness of the European economy. Sterling is in the middle. A view on sterling in the near-term is going to be influenced by the outcome of the general election. I have to say that based on where the polls are now the political uncertainty after the election is not going to be good news for the currency. I expect it to be relatively weak.”

Jim Mellon, a successful investor with a reported net worth of £850m thinks now is a good time to buy property in Europe. He said a year ago that the euro would fall significantly, and a fortnight ago he said that he believed the euro had now reached the bottom against the pound.

Jeremy Warner, economic commentator for The Telegraph said that he expected only a marginal effect from the election in the UK. Ambrose Evans-Pritchard said that what happens on the continent will have a more significant impact on the pound than domestic issues. He predicts that both currencies will be weak, but the euro will remain weaker, with a seven to ten per cent fall against the pound over the coming six weeks. Holiday makers may wish to wait and get even more bang for their buck when it comes time to exchange currencies.

Head of investments at Skerritts, Andew Merricks has a different view. He thinks that the pound is in a lose-lose situation regardless of the outcome of the election. A win for the tories would mean an EU referendum as promised, and the question of Scottish independence will still be looming. If Labour win or lead a coalition the danger to public funds could also provoke further instability in the pound.

He said “This election does look as though it is a lose/lose for sterling, at least in the short term. Go out and get your holiday money now, unless you have decided that the place to be in 2015 for a relaxing break is Russia or Ukraine, of course.”