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31 May 2017

Pound drops as projection suggests hung parliament possible

James Andrews, Head of Investment Management, comments as new projection suggests Conservatives may not gain outright majority in next week's general election.

“Having bounced back from post-Brexit vote lows, following Theresa May’s snap election call, the recent narrowing of the polls and the potential of a hung parliament have seen the Pound slump backwards, falling as much as 0.7 per cent today. The Pound had rallied following the announcement of a General Election, as markets foresaw an increased Conservative majority giving the UK a firmer footing for Brexit negotiations, with the city even perceiving that it could mean a softer Brexit. I’m not sure this was ever on the cards, and May has reiterated her stance that ‘no deal is better than a bad deal’, as no other country has access to the single market without allowing for free movement of labour – a sticking point given the mandate handed down by the electorate following the referendum vote.

“We are likely to continue to see volatility in the Pound in the run-up to the election and indeed for the foreseeable future as Brexit negotiations step-up post the outcome of the election. Given the prolonged uncertainty ahead of us, not to mention this short term election driven uncertainty, it seems any relief rallies will be just that, and the Pound will find it difficult to sustain any upward momentum. In addition, further rate rises in the US and stronger fundamentals from the European economy will likely see strengthening of the Euro and the Dollar, providing further headwinds for Sterling going forward.”

Pound drops as projection suggests hung parliament possible
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