Early May ushers in several big events for the British pound. First and foremost, traders will be eyeing election results on May 5 as a key factor for the pound going forward. While the Labour Party had retained a lead in the polls through mid April, their advantage had been narrowing.
“The election is foremost in a lot of people’s minds,” says Andy Busch, global foreign exchange strategist at Harris/Nesbitt in Chicago.
For now, most market watchers believe that Labour Party leader Tony Blair will retain power. However, the key issue will be whether or not they lose parliamentary majority seats, and if so, how many. Currently, Labour controls 161.
“If Labour loses a significant number of their seats — more than 10 to 15 — it will be bad for the pound as it will create political uncertainty,” Busch says.
Tom Rogers, senior currency analyst at Thomson Financial adds, “I tend to believe Blair will get re elected, [but] you’ve seen some guys getting out of pound assets [as of mid-April]. If the Tories win, people think the pound would go down a little bit.”
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