Euro to Pound

Political situation in the UK looks to be much murkier than ever suggested, but reaction to pound could suggest otherwise.

A sea-changed in British politics looks likely on general election day on 6 May. But it is not to everyone’s liking. The apparently sharp increase in voting popularity of the UK Liberal Democratic Party – the perpetual ‘third force’ in British politics – has thrown up a specter for the bond markets. A ‘hung parliament’ where no one party wins enough seats to command power on its own, could be highly dangerous for sterling and the markets. That is at least the view being put around by the Opposition Conservatives, who see the Liberals as possibly thwarting their bid to overturn the Labour government that has been in power since 1997.

I believe this pessimism has gone too far. The higher the Liberals voting score, the more apparently ‘uncertain’ the election results, the higher sterling will be against the euro, I believe. But because of dramatic deterioration of the euro situation, I see pound as one of the stronger currencies in the next six months.
A ‘cliffhanger’ election results, that give no party an absolute majority might actually quite good for sterling. Coalition government can be effective as happened in the past in the UK.