Election Day Jitters?

by | May 7, 2015

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Neil Davies, Head of Trading at PlutusFX, considers today’s election:

In the lead up to today’s election Sterling has been declining against the Euro, trading at GBP/EUR 1.4 eight days ago and hitting as low as 1.335 this morning. However, as I write it has been bought back up above the 1.343 level.

Over the next day, days or weeks, there is the potential for more significant volatility with the uncertainty that the closest election for decades might bring, though how much this has been anticipated and factored in is yet to be seen.

Enough Tory votes to continue with the current coalition, or something similar, may see a rise in Sterling and also a rise in the Stock market, which is off nearly 2% as well this morning.

I could well be though, that a less decisive vote result has already been factored in with Sterling having already seen some weakness. However, if there is a more extreme result, such as significant power going to SNP or even UKIP, then look out.

News elsewhere looks more encouraging, as the UK service sector grew at its fastest rate in April, with the PMI index up from 58.9 in March to 59.5. Though on the face of it, growth is good, the concern is the economy’s continued inability to rebalance towards manufacturing.

If current consumer spending levels don’t continue though, the ride might get a little bumpy.

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