Risk of hung parliament drives down sterling

Opinion polls have not been accurate or even near-accurate in recent elections, but unlike some that saw the Conservatives increasing their majority, a new poll by YouGov published by The Times suggested a hung Parliament.

Britain's Prime Minister Theresa May speaks during a Q&A at Cross Manufacturing Company in Odd Down in Bath, Britain, May 31, 2017.

Previous polls had forecast that the gap between the parties might be narrowing but now there is some doubt among investors that the gap might be far tighter than initially expected.

"From the pollsters' point of view this is an experimental election".

"I have the plan for the Brexit negotiations but I've also got a plan to build a stronger and more prosperous Britain and I'm confident we can do that".

However, one must consider that in a small time span it is very hard to correctly predict the outcome as the snap election was called only in April.

YouGov notes that their confidence band also includes the Conservatives taking 345 seats (vs Labour at 223), putting them into majority territory.

Yesterday morning the pound fell 0.5 per cent to a little above $1.27 against the dollar, says the BBC, its lowest level in more than a month.

Sturgeon previously said that she would be willing to enter a "progressive alliance" with Labour but did not "want a Tory Prime Minister or Tory government".

But the 20-point opinion poll lead of the time is now into single figures. However, a Labour victory could result in a rally for the Sterling, Meggyesi argues, if Jeremy Corbyn, Tim Farron and Nicola Sturgeon were able to form a coalition government.

We would highlight that YouGov's result highlights an important additional problem: neither the Conservatives nor an alliance of Labour, Liberal Democrats and SNP might be able to muster a majority.

May, who won the top job in the political chaos following the shock June 23 Brexit vote, used a speech on Thursday in northern England to pitch her vision of Brexit.

JP Morgan undermined Theresa May's message on Tuesday, suggesting that center-left United Kingdom coalition could steer the negotiations away from a hard Brexit.

Sterling is set to remain volatile due to Brexit uncertainty.

The ruling party had a slender working majority of 17, which led to some unease during key moments in the House.

At the beginning of May, the Conservative Party enjoyed a 16-point lead according to the polling average from the Press Association.

"Her resolve on Brexit is not in doubt; but her ability to deliver the best deal for Britain in terms of the closest possible relationship with the European Union is worryingly unclear", it said.

  • Salvatore Jensen