British PM May could lose majority in June 8 election: YouGov projection

Measures of expected volatility in sterling that cover the election are jumping this week, while last week's drop against the dollar was the pound's worst this year.

Britain could be on course for a hung Parliament in nine days time, according to a new projection that suggested the Conservatives could fall 16 seats short of an overall majority.

While most polls show the Conservatives' lead over the Labour Party narrowing, the YouGov analysis for the Times - based on a constituency-by-constituency estimate - has been the most dramatic.

Update: The pound has swung into gains against the dollar, reversing losses sparked by a poll predicting a hung parliament, as a rival survey showed the Conservatives extending their lead among voters ahead of next week's general election.

The Prime Minister, who was ridiculed by opponents after refusing to take part in a major TV debate on Tuesday night, will suggest there could be a "brighter future" for the United Kingdom if there is a good deal with the European Union.

"Set free from the shackles of European Union control, we will be a great, global trading nation once again bringing new jobs and new opportunities for ordinary working families here at home", May said.

"You really can't run a portfolio around poll results", said Eric Moore, a portfolio manager at Miton Group, who added he had not changed his portfolio much and remained wary of United Kingdom consumer stocks. Fast forward a month and a series of political blunders and a populist Labour manifesto has seen the lead shrink to just 5 points and a real prospect of a hung parliament that could force another coalition government.

One thing is for sure, the direction of this election is shifting. Although we continue to think that the Conservatives will win, we doubt that it will do so by a landslide.

The FTSE 100 attempted to make a record high on Wednesday, although it failed at that endeavour, and the 10-year UK Gilt yield, although retreating, has found support at the critical 1% level. "This is looking like an increasingly likely outcome, if you average the polls; hence the muted response from the market is hardly surprising", says Brooks. The euro sell-off seems to have found a bottom around 1.1110. On Tuesday US bank shares were the weakest performer on the Dow, with Goldman Sachs and JP Morgan the weakest performers in the entire index. Today's Eurozone CPI and unemployment data could help boost EUR/USD back above 1.12 if we get some good numbers.

Brits will vote for their new government June 8.

  • Zachary Reyes