What Impact Will The German Election Impact UK Companies?
According to Godi’s managing director Paul Langley, UK companies should be prepared for possible currency fluctuations in the lead-up to Germany’s elections.
As if the world were not already tired of the political climate and Germany’s Federal Elections will adding yet another election to the list of events that will impact the global market. Although not as raucous and arduous as the US presidential election and not as violent as those who voted in the UK quick General Election or Macron’s win in France, the German election is nonetheless significant.
The presidential election thus far has been surprisingly quiet.
The two leading candidates, the incumbent conservative Angela Merkel and socialist democratic Martin Schulz, held only one debate on television, in which the major issues were not discussed. The vote is not even a few days away. German parties plan to cooperate in the aftermath of the election instead of stressing their differences to influence those who aren’t sure.
A non-intrusive campaign, the result will remain a critical moment in German history. The far-right has not been able to bring delegates to the German Parliament. German parliament since the demise of the Nazis in 1945. It is likely the case on Sunday, when the extreme right, anti-immigrant Alternative for Germany party will likely achieve substantial gains.
There are six candidates from major parties for the office of chancellor; however, only two are likely to be successful. Chancellor Angela Merkel, the first female chancellor, has been in charge of the country for 12 years and is almost sure of a win. Merkel is a native of Communist East Germany and is a former scientist who earned an advanced degree in physical chemical chemistry.
Martin Schulz’s story is unique in German political circles, where academic degrees and academic qualifications often determine the path to a career. Schulz is the son of a high school dropout in an upper-middle-class family that has been open about his struggle with alcoholism. Before he ran against Merkel in the European Parliament, he served as the leader of the European Parliament.
Whatever the outcome, the global markets are reacting and eager to adapt to any change in the currency due to the outcome of the results of the election.
Considered to be one of the most potent leaders, A fourth term for Merkel could be the best option that will provide the most excellent stability for the citizens of Germany and the European Union (EU), particularly regarding the Brexit talks currently in progress. With Germany’s leading role in shaping the EU’s policies and decisions, this choice will significantly impact foreign and domestic policies in the years ahead.
How the coalition structure affects Merkel’s power is another issue that could cause concern for the UK specifically. In addition to Brexit talks, the relationship between the United Kingdom and Germany regarding trade agreements will be significantly affected based on the election’s outcome. It could create another problem for the UK Prime Minister, Theresa May.
Paul Langley, managing director of Godi Financial – formerly OSTCFX Paul Langley, managing director of Godi Financial – formerly OSTC FX, “Germany has an influential position in the EU, and the significance of these elections should not be undervalued. We’ve observed the Euro increase against a variety of major currencies in recent times, which indicates that there is confidence in Merkel keeping her place as the leader of Germany, and an optimistic mood throughout the country.
“As with all elections, market volatility and fluctuations are to be expected, and for businesses that have Euro exposure, it is essential to plan. Not being able to cover FX transactions due to the market’s volatility can be avoided by partnering with an FX service that will help you hedge your risk to the market’s volatility. This can also assist businesses to benefit from favorable changes and gain from any gains of the Euro.
“However, we’ve seen plenty of uncertainty in the economy and politics in recent times, including Brexit, Trump coming into power, and the devastating UK election, which means there is no guarantee. Implementing a solid plan to control fluctuations in currency to mitigate the way markets react to these outcomes is crucial. Businesses can ensure that they are in control when markets are tense in the aftermath of the elections. This can stop any financial losses from currency losses.”
Edward Hardy, an economist at WorldFirst, states, “More than twelve months since an EU election, it’s evident the SMEs throughout the UK are still cautious about fluctuations in the market prices and the disruption they create. The data shows that although SMEs were still able to protect their exposure to foreign currency in Q2, many still need to be ready to sign long-term hedge contracts. Although this could be due to uncertainty about cash flow, sales forecasts, or any other obligations to financial institutions, it might indicate the beginning of tensions in the relationship between UK SMEs and international trade.
“While one-quarter of data does not indicate a trend, should this trend continue, businesses both small and large are likely to be more susceptible to sudden fluctuations in the currency market. With Brexit discussions still in progress and the federal elections scheduled for September in Germany, Smaller businesses may not be protected when they require protection their most.”