Summary:
Sterling rose as PM Rishi Sunak announced a parliamentary election on July 4, reducing political uncertainty, according to analysts.
Sterling edged higher on Wednesday after PM Rishi Sunak called a parliamentary election for 4 July, which analysts said removed a degree of political uncertainty.
Two-month sterling options volatility rose by the most in one day since mid-April. The opposition Labour Party has held a lead over the Tories of around 20 points in opinion polls since late 2021.
Market watchers say that with the date announced, investors would start to pay more attention to policy proposals, especially from Keir Starmer. He has unveiled a pledge card with six key policies.
That includes making the UK the fastest-growing major economy by the end of a first Labour term in government and achieving clean power by 2030. The economy pulled out of a technical recession in Q1.
The Conservative Party took power during the depths of the global financial crisis and have won two more elections since then. But the Brexit referendum they initiated has made the 14 years very turbulent.
Starmer is looking to improve the relationship from 2025 when the UK-EU partnership deal will be reviewed. He also says he will not take Britain back into the bloc's single market or a customs union.
The pound is trading sideways around its 2-month high with the initial support at 1.2670. Technical indicators point to a continuation of the rally towards 1.2800 hit in March.
Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.
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