Pound falls as Conservative poll lead narrows

Pound falls as Conservative poll lead narrows

With the general election little more than two weeks away, the general public and market indices alike wait with baited breath. What is on offer are two starkly different visions for the future of the UK, with both equally likely to intensify existing divisions. Today, however, the pound showed the market’s preference, as it dipped following a narrowing of the Conservative party’s lead in the polls.

“It is hard to disagree that a Conservative majority is the most likely outcome of the election, but with markets priced for this with a high degree of confidence, the hurdle is low for GBP slipping back to the bottom of its recent range,” says Adam Cole, a foreign exchange strategist with RBC Capital Markets.

Analysts have already warned that Sterling has erred on the side of overconfidence in a Conservative majority, and the publication of each party’s manifestos through the past week has done little to temper the anxieties of markets or the UK’s oldest party.

Labour face the same criticisms of ‘nice ideas, where is the funding coming from?’, which is a question they’ll struggle to sidestep. Regardless of their insistence to the contrary, extracting tax from the highest earners is a fool’s errand without an international and unilateral effort, which puts their fiscally-led ambitions in jeopardy.

Meanwhile, the Conservatives will have to lean heavily on their Brexit policies, as many of their proposals outside of infrastructure spending are either efforts to reverse the damage it has inflicted since 2010, or are simply uninspiring. The party has struggled to answer substantive questions on policy, surrounding NHS performance and the stark failure of their flagship ‘starter homes’ housing policy. Their inability to offer any kind of tangible guarantees to the electorate were evidenced on the latter issue alone: when put under the cosh Housing Secretary Robert Jenrick merely restated the party’s commitment to a ‘vibrant’ market, while Liz Truss looked like she’d seen a ghost as Andrew Neil took apart the party’s failings on live TV.

The contest looks more closely thought then imagined then. Though the Conservatives are certainly the favourites, we’re hardly being spoilt for choice with credible options.

Speaking on recent polling data and the market’s response, Spreadex Financial Analyst Connor Campbell commented,

“Showing an increasing sensitivity to election matters, the pound gave back some of Monday’s gains following the latest poll.”

“Yesterday the pound rose on reports that the Conservatives were facing an 80-seat majority after December 12. Well, today, a survey by Kantar shows Boris Johnson and co.’s lead has been cut from 18 points to just 11 in the space of 7 days, news that has left sterling down 0.3% against the dollar and euro alike. That followed an ICM poll late on Monday giving the Tories just a 7 point lead, a 10-point reversal week-on-week.”

“With the pound in the red, the FTSE was able to eke out a 0.1% rise while its Eurozone peers trickled lower. Returning to 7400 after last Friday sinking below 7250, the UK index sat at its best price for 2 and a half weeks.  In contrast the DAX and CAC slipped 0.2% apiece, slipping under 13250 and 5925 respectively.”

Overall, it has been a fairly quiet morning following Monday’s rallies. Greencore Group plc (LON: GNC) reported a revenue dip, Topps Tiles (LON:TPT) are pessimistic on the GE outlook, Pets at Home shares (LON:PETS) saw its profits increase and the market reacts to Uber (NYSE: UBER) losing its London licence.

“The muted movements of the European indices, alongside the prospective flat open for the Dow Jones later today, reflects a lack of trade deal updates this Tuesday. Though there was a call between key players Liu He, Robert Lighthizer and Steven Mnuchin, the post-discussion statement claiming that ‘both sides discussed resolving core issues of common concern’, had ‘reached consensus on how to resolve related problems’ and agreed to ‘stay in contact’ over their remaining differences was a tad too vague to spark significant growth. At least, not after Monday’s gains.”