Sterling holds gains as markets bet on Tory win
Sterling held its gains against the euro and the dollar as currency markets surveyed polls suggesting Boris Johnson’s Conservatives were on course to secure a comfortable Commons majority in Thursday’s election.
Sterling traded at 84.14 pence per euro and $1.315 as Jeremy Corbyn’s Labour trailed the Conservatives by an average 10 percentage points in the poll of polls.
The result of the 2017 UK general election showed there was still considerable scope for a surprise outcome, analysts say. “Boris Johnson’s Conservative party continue to poll strongly in the lead up to the vote, and this is reflected in a strengthening pound,” the treasury desk at Investec Ireland said.
“However, the lower range of the polls indicate that the eventual winning margin could be narrow enough to cause the Tory party difficulty, and as we have seen in the past, polls aren’t always an accurate predictor, especially when there is a particular factor (Brexit in this case) which is causing certain regions to diverge from historic voting patterns,” it said.
And Capital Economics in London said that British politics will weigh on the currency “one way or another”, citing the continuing risk over the December 2020 deadline when the UK and EU are supposed to have struck a comprehensive trade deal.
“And if Labour were to pull off a surprise election victory, the boost to the economy from a softer Brexit (or no Brexit at all) and a larger fiscal stimulus would be offset by the drag from Labour’s business-unfriendly policies,” Capital Economics said. Meanwhile, global shares fell slightly as investors looked to Sunday when the next stage of US tariffs against Chinese imports is due to get underway.
