Support For Pound Sterling Forecast to Collapse on UK General Election

May 4, 2015 - Written by John Cameron

STORY LINK Support For Pound Sterling Forecast to Collapse on UK General Election

The Pound Sterling (currency:GBP) has taken a hammering in the markets during Friday’s session.

The move has seen the GBP EUR exchange rate jettison support, with the pair dropping to as low as 1.3477 a short time ago.

This represented the pair’s lowest showing since the third week of February. Consecutive closes above the pair’s most recent low of 1.3541 would be required in order to signal an end to the sharp downward movement of recent days for the pair.

The selling pressure on Sterling has been driven by renewed fears over who might be running the UK economy after next Thursday’s domestic General Election. Last night’s televised questions and answers session from the leader’s of Britain’s three major political parties has increased investors’ levels of nervousness ahead of next Thursday’s popular ballot. The main driver of the confusion was Labour Leader Ed Miliband, who emphatically confirm that not only will he will not enter into an official coalition with the Scottish National Party, but that he will not enter into any agreement of any sort with the Scottish Nats.

The Labour supremo stated that he is, ‘not going to have a Labour government if it means deals or coalitions with the Scottish National Party.’ He went on to re-emphasise this point by confirming that, ‘if the price of having a Labour government was coalition or a deal with the Scottish National Party, it's not going to happen.’

Until Miliband’s comments, political analysts were forecasting that the most likely election result would bring a Labour minority government propped up by around 50 SNP members on a vote-by-vote basis. His clear-cut statement has completely re-shaped the landscape of the election. It appears highly unlikely that either Labour or the Conservative party will garner the 325 votes required to command a majority after the election. This means that either Miliband or leader of the Conservatives David Cameron will have to rely on the support of minor parties in order to rule. Their 5-year stint as the junior partner in a coalition government has seen support for the Liberal Democrats collapse and they are expected to be left with as few as 25 MPs come next Friday. Such a situation would significantly weaken the Lib Dem’s hand and the SNP is likely to be left as the third largest party in Westminster by some distance. The Scot Nats flatly refuse to deal with the Conservatives and are now being given the cold shoulder by Labour, meaning that a second UK General Election may take place before the middle part of Summer. The upshot could see support for the Pound collapse further.

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