Thursday 23 January 2020

Conflicting UK polls spark volatility for pound

British Prime Minister Theresa May is fighting to sustain an overall majority in the House of Commons. Photo: PA
British Prime Minister Theresa May is fighting to sustain an overall majority in the House of Commons. Photo: PA

Colm Kelpie

Differing opinion poll results dented the pound yesterday as fears over the prospect of a hung parliament receded and British Prime Minister Theresa May looked to be gaining ground over her Labour opponent.

The UK currency plunged in the wake of a YouGov poll showing Mrs May's once commanding lead had been wiped out, and the Conservatives would fall short of the required seats for an overall majority. But a second poll, released just hours later, had her lead at 15 points, giving the pound some respite.

Still, sterling hovered just over the 87 pence against the euro mark, highlighting investors remain jittery.

Investec Ireland predicted more volatility to come ahead of that general election on June 8.

"It's worth remembering that polling figures have been varying widely in the past few weeks, and also that polls significantly overstated Labour's position heading into the last general election," it said, in a note to investors. "If nothing else, the wide range in polling numbers will continue to boost uncertainty and keep the pound weaker as we head towards next week's vote."

The pound has reversed nearly half of its 4pc gain since Ms May called the election.

Sterling dropped last week, rounding off the worst week this year, and is now tipped for weeks of volatility as investors question whether Mrs May will achieve the increased majority the market had in effect priced into the pound in recent weeks.

Data last week showed UK growth in the first quarter was slower than first thought, and consumer confidence has also fallen to its lowest since the Brexit vote.

US banking giant JPMorgan argued markets might actually react positively to a defeat for Mrs May. It suggested there was the possibility of a softer Brexit under Labour's Jeremy Corbyn.

Meanwhile, the European securities watchdog has warned EU states that Brexit-related authorisations must be "rigorous and efficient", and that there should be no letter box entities.

Financial Services Minister Eoghan Murphy had warned earlier this year of regulatory arbitrage among certain states seeking to lure post-Brexit jobs from London.

The European Securities and Markets Authority (ESMA) set out nine principles that tell regulators to start from scratch when asked for a licence.

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