Pound falls as analysis projects hung United Kingdom parliament

Andrew Cummings
June 1, 2017

Sterling traded half a per cent lower against the U.S. dollar after the YouGov data was published. Investors had been pushing the pound above $1.30 on hopes a bigger Conservative majority would strengthen May's negotiating power in the coming Brexit negotiations with Brussels, as the United Kingdom looks to establish fresh trade ties after its vote a year ago to exit from the European Union, dubbed Brexit.

The new modelling by one of the country's leading pollsters suggests the Conservative Party would fall short of an overall majority by 16 seats, meaning a hung parliament and potential coalition talks. The possibility of a hung United Kingdom parliament has sent the pound lower.

Recent national opinion polling suggests that Labor has closed the gap on the Conservatives, but not as dramatically as the YouGov projection indicates.

The Times said the YouGov data suggested that the Tories could lose up to 20 of the 330 seats they held in the last parliament, with Labour gaining almost 30 seats he Conservatives would still be the biggest party, but would not have an overall majority.

But her Conservative Party remained on 43 percent according to a survey conducted by Survation for ITV's Good Morning Britain program, seeing their lead drop as support for Labour rose 3 percentage points to 37 percent.

"Recently we've been relatively agnostic about sterling, but have now made a decision to underweight the currency for the next couple of weeks, in case the depreciation accelerates", Cosimo Marasciulo, head of European fixed-income at Pioneer Investments, said in emailed comments.

"Our base case scenario is the Conservatives will ultimately win a larger majority - which could see cable (sterling/dollar) pop back towards the $1.30 level following the election".

The Tories had enjoyed a healthy lead over their rivals in the polls, placing the party in pole position to return a healthy majority in the snap election on June 8.

"I invite her to go to Cambridge and debate her policies, debate their record, debate their plans, debate their proposals and let the public make up their mind", he said.

"The central projection of the model, which allows for a wide margin of error, would be a catastrophic outcome for Theresa May, who called the election when polls pointed to a landslide result", The Times wrote.

Pickering said Berenberg would not be surprised if the outcome of the United Kingdom general election also turned out to be a surprise, even while all the polls still project that the Conservatives will be ahead in the vote.

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