Volatility expected in Pound with tonight's debate

Financial and commodity markets analytics

The British Pound made solid gains in yesterday’s trading session, moving towards the $1.30 mark against its US counterpart on the back of election polls over the weekend that showed UK Prime Minister Boris Johnson’s Conservative Party had increased its lead over their rivals, the opposition Labour Party, which greatly increases the chances that Johnson’s government will be able to command a majority at the upcoming election.

The numbers now show the conservatives with a 45 percent share of the electorate with Labour trailing far behind on 28 percent and the remaining parties trailing a distant third such as the Liberal Democrats who are sitting on 15 percent.

With such figures, and the Conservatives on track to win, the pound should be much higher according to some analysts but the shock results of previous elections such as the one that the former Prime Minister Theresa may called which caused the Conservatives to lose their majority in parliament tend to see people looking at the poling numbers with a bit of skepticism.

"The market is on balance inclined to believe the polls, but is still scarred by the 2017 experience to fully commit to the Tory majority scenario until closer to the time. It doesn’t help that from a polling trend perspective, it looks spookily like 2017 again with both Labour and the Conservatives marginalizing the smaller parties and enjoying a day one bounce," says Jordan Rochester, a foreign exchange strategist with investment bank Nomura.

"Folks are unwilling to buy into the end game trades this early on in a campaign. Given I expect polling between Labour and the Tories to narrow as the campaign develops the Labour manifesto launch and reception by public will be key". He added.

Further clarification about the major party’s manifestos will be on display tonight as Prime Minister Boris Johnson goes head-to-head with opposition Labour Party leader Jeremy Corbyn in a televised debate and the market will be looking to see if Johnson or Opposition leader Corbyn come out on top and shed some more light on just how the election will unfold in December.

The pound is likely to react quite strongly tonight to the market’s perception of who won the debate and a strong performance by Prime Minister Johnson may see the British currency break above the $1.30 mark while a win by Corbyn may raise speculation of a hung parliament again and a further delay with Brexit which will see the pound come under pressure


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