Encouraging signs for the pound?

Fears of a nightmare scenario for sterling are jumping the election gun, according to a City expert

A City expert is claiming that the threat of a worst-case scenario for sterling are diminishing. After recent falls due to concerns about a hung Parliament in the coming election, sterling rallied on better-than-expected Consumer Price Index data. Now, Mark O’Sullivan, director of dealing at foreign exchange firm Currencies Direct says: “Sterling’s rally over the CPI data, as well as opinion polls showing the Conservatives again moving ahead, may well help to allay the financial markets’ concerns about the pound’s prospects.

“The markets were unhappy with the prospect of a hung Parliament, but today [20 April] is the last day to register to vote, which means the apparent surge in Liberal Democrat popularity may have come too late. The Conservatives’ stronger poll showing means worries over a hung Parliament are fading.”

Referring to Britain’s recent first-ever televised leaders’ election debate, Mark goes on to say:

“A good proportion of those who may have liked what they saw in Mr Clegg’s performance… may not even be registered. This could well play into the hands of the two main parties.

“The nightmare scenario being envisaged for sterling was a Liberal Democrat–Labour coalition government, with even a Conservative-Liberal Democrat alliance likely to bring the pound under pressure.

“But without a late boost to voter registrations the impact of Cleggmania’ seems likely to be negligible, a further positive for sterling as it would push the idea of a hung Parliament to the back of investors’ minds.”