Why the election call has been no problem for the pound

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Why the election call has been no problem for the pound

Any time there is an election, it adds some uncertainty to a currency. Normally in G7 currencies, that volatility is small because (in the bigger picture) the stakes for elections are low. Yes, politics shape a country over generations but the market prices in those changes at a glacial pace.

In the case of the UK, the stakes are especially low and that's because the market has long assumed a Labour win in the election. Certainly, it's come a few months earlier than forecast but that hardly matters and the betting-market numbers tell the story: Conservatives are 13/1 to get the most seats with Labour at 2/17. Labour is 1/8 to get an overall majority.

There will be some hand-wringing about campaign promises but no one is pricing in mandatory military service or any earth-shattering changes to the economy.

As for today's price action, the pound is up but that's mostly about USD weakness and risk appetite. The pound is trailing the commodity currencies.

                This article was written by Adam Button at www.forexlive.com.

Source: Why the election call has been no problem for the pound

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