It's not been a good week for UK prime minister Theresa May, already under pressure earlier in the week as a result of a shambolic manifesto U-turn, another opinion poll released overnight showed that the Conservative lead over Labour has been cut to five points.
With the pound already under pressure, this acted as an additional catalyst in pushing the pound to a two-month low against the euro and to a one-week low against the US dollar.
A move below the 1.2840 could well see further losses towards the 1.2750 area in the short-term if these mid-election polling wobbles don’t show some signs of stabilising.
The recent sterling losses do appear to reflect some signs that the optimism around sterling’s recent rally is giving way to increased nervousness about the UK’s ability to agree any sort of Brexit deal, when none of the parties appears to have either a coherent plan for a post-Brexit Britain, or any vision of a coherent leadership.
While mid-campaign polling wobbles are nothing new, take the rogue Scottish referendum poll in 2014, neither of the main parties have manifestoes which appear to add up, with the Institute of Fiscal Studies criticising both.
Theresa May still remains the favourite to win on 8 June, but recent events have taken their toll, which means the Conservatives need to get their act together, otherwise the perception will be that any win is likely to be down to the poor quality of the opposition, and not a vote of confidence in her. That’s not a particularly healthy state of affairs to be in at a time when Brexit talks are due to start at the end of next month.
Heightened market volatility is likely over the election period, which could result in widened spreads. We recommend that you monitor positions carefully, consider the use of appropriate risk management tools and maintain a sufficient account surplus throughout this period.
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