30 Apr 2015
UK political uncertainty set to weigh on GBP – Rabobank
FXStreet (Barcelona) - Strategists at Rabobank argue that this UK election has the capacity to create more uncertainty, and that this political risk is going to weigh on the Pound going forward.
Key Quotes
“The political uncertainties this year appear to be extremely high. There is risk that the UK may have to wait a relatively long period before a coalition government is formed. If/Once it is in place, there is fear that it may not be sufficiently coherent to last the full five years.”
“That said, if the 2010 election is used as a precedent, it may be assumed that election jitters in sterling may be fairly muted in the coming weeks.”
“We would argue, however, that this election has the capacity to create more uncertainty than the last. Firstly, opinion polls have not been universally showing that the ‘business friendly’ Tory party is in the lead. Secondly, that ‘business friendly’ tag is confusing since if the next coalition is led by the Tories, a referendum on EU membership is likely.”
“The risk that the UK could leave the EU has the potential to worry international investors more than the general election itself. Given also the unknowns regarding the composition and coherence of the new government, on almost all outcomes the uncertainties for investors could rise post election. This could weigh on sterling going forward.”
Key Quotes
“The political uncertainties this year appear to be extremely high. There is risk that the UK may have to wait a relatively long period before a coalition government is formed. If/Once it is in place, there is fear that it may not be sufficiently coherent to last the full five years.”
“That said, if the 2010 election is used as a precedent, it may be assumed that election jitters in sterling may be fairly muted in the coming weeks.”
“We would argue, however, that this election has the capacity to create more uncertainty than the last. Firstly, opinion polls have not been universally showing that the ‘business friendly’ Tory party is in the lead. Secondly, that ‘business friendly’ tag is confusing since if the next coalition is led by the Tories, a referendum on EU membership is likely.”
“The risk that the UK could leave the EU has the potential to worry international investors more than the general election itself. Given also the unknowns regarding the composition and coherence of the new government, on almost all outcomes the uncertainties for investors could rise post election. This could weigh on sterling going forward.”