Here Comes The Pound Roller Coaster Now That U.K. Election Day Has Been Named

The U.K. just entered its election season and the pound could be rocked by further poll anxiety as the May date comes closer.

Prime Minister Gordon Brown named May 6 as the election date, setting up his Labour Party’s square off against the poll leading Conservatives and the up-start Liberal Democrats.

Labour stand just 4 points behind the Conservative Party in the latest poll from Guardian ICM. The British public has not settled on Conservative leader David Cameron’s fiscal austerity campaign, instead preferring to hope their current Prime Minister, Gordon Brown’s, more middle-ground approach becomes the norm. Of course by middle ground, we mean more loose with the public purse, which may not be in the British pound’s best interest.

But the country doesn’t exactly love Gordon Brown either, and with 13 years of Labour rule behind them, the U.K. is irking for a change. Just not necessarily the change towards austerity Cameron is currently offering.

Both candidates will push towards the centre, offering campaign sweeteners to the all important “Middle England” vote, the equivalent of America’s “heartland voter.”

Thus the pound could get choppy as the polls tighten, as markets battle with concerns that U.K. politicians will have to err on the side of more (rather than less) government spending in order to keep as many people as possible happy with their camp. The prospect of the U.K. heading towards a hung parliament, and policy stalemate, also makes the passage of tangible austerity measures even less likely.

In overnight trading the pound is down slightly against the dollar.

GBPUSD April 5

On a longer view, perhaps we’re in for another down-leg.


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