The pound suffered this morning upon the release of poll data showing that the gap between the Conservatives and Labour is narrowing; although the Tories still maintain a double-digit lead, the recently released Labour manifesto was positively received by voters, adding to market fears of a hung parliament.
The market fears a hung parliament as further delays, extension and uncertainty in the Brexit process mean British businesses cannot adequately forecast their plans for the years to come. If businesses lack confidence then consumers usually follow, which has been reflected in the UK’s sluggish growth of late, with sterling following suit. Service and manufacturing figures released at 9.30 GMT painted a very bleak picture indeed, with UK companies enduring the sharpest downturn since the Brexit referendum in 2016.
Whilst the fact remains that Brexit is an obvious drag on the pound, the market seems largely resigned to putting its faith in the orderly departure as championed by the Conservatives. A Lib Dem majority could give the pound a huge lift if they were to ‘Stop Brexit’; the likelihood of this actually transpiring though is minimal, as low as 4% by some analyst predictions.
Across the Channel, new ECB President Lagarde will give a keynote speech urging Eurozone leaders to boost public investment – something that Germany has already taken heed of in the face of a sluggish economy, who’s direction is dictated by the ongoing trade war between the USA and China.
Have a great weekend.
Author: Joshua Haden-Jones, Senior Relationship Manager