Pound pressured as election risks weigh on sentiment

May 31

16:33 2017

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The major story around the financial markets today is the British Pound being pressured against its counterparts as investors price in upcoming election risks into the currency.

The GBPUSD has slipped to a weekly low below 1.28 so far during trading, and traders will be keeping a close eye on whether the pair can conclude trading below 1.2755. This could encourage further selling pressure to where the Pound was valued when Theresa May unexpectedly called a snap election at around 1.25.

These losses being seen in the Pound can be strictly linked to the financial markets becoming anxious with a major election taking place just over one week away, and investors stacking their cards heavily in favour of Theresa May winning a one-horse race. Recent indications have suggested that the election is going to be a closer call than what was previously thought, and traders are now starting to shuffle their cards towards other potential outcomes.

All in all, the slide in the Pound provides another example of the markets underpricing risks heading into a major election. I personally don’t think that the markets are prepared for a close election as it is, let alone other possibilities such as the potential for a hung parliament.