The Pound has been trading slightly lower mid-week but nevertheless it is still trading towards the top end of its recent ranges against the Euro and USD, with most investors focusing on the December 12 General Election. Polls are now showing the Tories only 12 points ahead of the Labour Party vs the 14 points ahead earlier in the week. it’s not surprising to see the Pound a little weaker against the EUR and USD.
With the Tories still holding an advantage in the polls over labour, all eyes were on the ITV debate between party leaders Johnson and Corbyn last night for any stand-out performances that might shift the electorates opinion.
The Pound is currently tracking the odds of a Conservative majority, showing a positive correlation with increased prospects of such an outcome. If the PM delivered a poor performance last night this could have triggered a decline in the Pounds value.
However, the debate went well for both leaders, an outcome summarised by a snap YouGov poll following the debate that showed the two leaders virtually split on perceived performance, with 51% of polled viewers judging Johnson to have won the debate, against 49% for Corbyn.
This leaves the balance of risk for Sterling pointing lower over the coming weeks, simply because any closing gap between the Tories and Labour in the polls will likely trigger a downward correction. The markets have already priced in a labour majority as unlikely, but such a result poses months of further uncertainty for the UK economy, thus weakening the Pound if the gap closes further.
With this election proving difficult to call, we could see further gains to be made for the Pound. However, markets will almost certainly wait for the result itself before pushing Sterling higher.