Market wary of big sterling swings as Britain votes
- Author: Zachary Reyes Jun 08, 2017,
Jun 08, 2017, 17:42
"It's now universally agreed that a hung parliament would be the very worst case scenario for the pound with some analysts predicting the single currency to spike as high as £0.92 on the news", Investec's Irish arm said in a note to investors.
But Britain's currency has been subject to large swings in the weeks that have followed.
However, at the start of the campaign the Conservative had as much as a 24-point lead when the election was first called, in what has widely been seen as a faltering drive for votes by the Prime Minister.
The pound struggled for direction on Thursday (8 June), as Britons headed to the polls to elect the next Prime Minister.
Sterling peaked as high as US$1.2951 on Tuesday against a broadly weaker U.S. dollar, its highest in 12 days, before edging back to trade up 0.1% on the day by 0850 GMT at US$1.2923.
The greenback was flat against its Australian counterpart and slid 0.11% against the Canadian dollar to CAD$1.3494.
"Against the euro the pound has been less successful of late; nevertheless, despite being a long way from recovering the losses it has incurred since mid-May, a 0.1 per cent increase has nudged the currency to a one and a half week peak".
But since then sterling has been experiencing volatility as the markets await the results of the election.
Today the European Central Bank will meet to discuss inflation projections, which is also likely yo have an affect on the exchange rate.
"As we move closer to the election the pound is expected to trade in a choppy manner as investors will be reacting to last-minute exit polls with the current range of 1.2800 to 1.2900 capping any short-term price action".
Meanwhile, the euro edged lower after the European Central Bank (ECB) lifted its forecasts for economic growth in the Eurozone but kept interest rates on hold.
United States investors will not turn their focus on former FBI Director James Comey's testimony before Congress at 3pm BST, which could trigger some significant political turmoil.
"Voters over in the United Kingdom are going to vote for their new Prime Minister, the European Central Bank will deliver their verdict about their monetary policy and James Comey will testify in front of senate".
TD consider this as the most likely outcome at 45%.