The pound might fall to 1.20 against the US dollar if the UK delivers a hung parliament, deVere Group has said.
The prediction from founder and chief executive of deVere Group’s Nigel Green followed new polling that indicated that the majority of polls tracking the UK election suggesting 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,” he said.
“Sterling fell 0.2% 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.”
According to Green, such a scenario would further intensify uncertainty into 2021, since uncertainly is never welcomed by financial markets and might cause the pound dip on the news of Labour closing in on the Conservatives ahead of Brexit election.
“The uncertainty would also serve to continue to dampen business investment which, of course, will drag on economic growth,” Green warned.
“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 US becoming increasingly more expensive. Even destinations such as Dubai and China are more expensive as their currencies are pegged to the US dollar.
“Should Mr Johnson’s Conservatives win the election, the pound and UK financial assets stand to gain with immediate effect.”