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The British pound might fall to 1.20 against the U.S. dollar if the UK election delivers a hung parliament, according to the CEO of one of the world’s largest independent financial advisory organisations.
The prediction from Nigel Green, the founder and chief executive of
deVere Group, comes following new polling that indicates that Jeremy
Corbyn’s Labour is closing the gap on Boris Johnson’s Conservatives in
next week’s general election.
Kantar demonstrated an increase of 5 per cent for Labour, meanwhile
Ipsos MORI flagged a gain of 4 per cent, with the influential YouGov
polls showing an increase of 2 per cent.
According to Green, “The overwhelming majority of polls tracking the UK election clearly suggest growing support for Labour.
“The surge for Labour in the recent polls, which raises the spectre of
another hung parliament, has been reflected by the dip in the pound
against the dollar, the euro and other major currencies.
“Sterling fell 0.2 per cent to $1.29 on Monday with the odds on a hung
parliament being delivered next week narrowed to as low as 7/4 – down from 9/4 last week.”
Continuing, the deVere boss said, “I think we can expect the pound to fall to $1.20 in the event of another hung parliament.
“Should a Conservative majority be delivered, I believe the pound will
reach $1.35.
“A hung parliament is likely to lead to another EU referendum and
another Scottish independence referendum.
“This would intensify uncertainty perhaps into 2021. Uncertainty is
something financial markets loathe and this is why the pound has dipped on the news of Labour closing in on the Conservatives ahead of this crucial Brexit election.
“The uncertainty would also serve to continue to dampen business
investment which, of course, will drag on economic growth.”
He added, “The significant drop in the value of the pound could
contribute to reducing people’s purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.
“A low pound is also bad news for British expats who get a UK pension
or UK income – plus it’s bad for holidaymakers and travellers abroad – with trips to Europe and the U.S. becoming increasingly more expensive. Even destinations such as Dubai and China are more expensive as their currencies are pegged to the U.S. dollar.”
The deVere CEO concluded saying, “While it is most likely that a Conservative majority will be delivered, next week’s election is looking like it will be closer than many had expected at the beginning of the campaign.
“Should Mr Johnson’s Conservatives win the election, the pound and UK
financial assets stand to gain with immediate effect.”
