The pound sterling edged slightly higher against the greenback on Tuesday as investors tried to switch their focus to the upcoming general election from the weekend’s terror attack. The Conservatives, ahead of the Labour party by a massive 20 points six weeks ago, now have 42% of voting intention or a four point lead over Labour.
GBP/USD continued to gather momentum as it rose 0.15% to 1.2925. The UK may be heading for a bumpy ride as the Conservatives may not get the expected support from the people. Investors anticipated that a solid Tory lead will help the UK get a better deal from the European Union. However, the eroding Tory support runs counter to these expectations and raises the likelihood of a GBP sell-off. Nevertheless, Theresa May’s party will surely remain in office and will even increase their working majority in the House of Commons. Therefore, we believe it is too early to ring the alarm bells yet.
By Peter Rosenstreich