Is a Hung Parliament the Worst Case Scenario For GBP?

The pound could plunge to as low as $1.20 on Friday, a level last seen in January, should the U.K. snap election lead to a hung parliament, according to a Bloomberg poll of analysts.

Such an outcome, though seen as unlikely, would be marginally more negative than even an electoral upset that sees the Labour Party defying odds to emerge the winner, according to the survey of 11 banks and brokerages. That suggests investors don’t share Prime Minister Theresa May’s view that when it comes to Brexit, not having a deal is better than a bad one. A victory for May’s Conservative Party would be supportive of the pound, and this outcome is more or less already priced in, the analysts say.

That suggests investors don’t share May’s view that no deal is better than a bad one when it comes to this week’s U.K. election. Of all the potential outcomes, including a win by the Labour party, a hung parliament would be the worst one for the pound, according to analysts surveyed by Bloomberg.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Currency Analyst at OANDA
Based in London, England, Craig Erlam joined OANDA in 2015 as a Market Analyst. With more than five years' experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while conducting macroeconomic commentary. He has been published by The Financial Times, Reuters, the Wall Street Journal and The Telegraph, and he also appears regularly as a guest commentator on networks including Sky News, Bloomberg, CNBC and BBC. Craig holds a full membership to the Society of Technical Analysts and he is recognized as a Certified Financial Technician by the International Federation of Technical Analysts.