Biggest 1 day drop for the pound in 1 year.

Good Morning. The pound fell in a big way against all currencies yesterday, after polls showed that we may yet have a Labour government for another four years. Rates @ 08:30am this morning are as follows:

  • GBP/EUR 1.1030
  • GBP/USD 1.4905
  • GBP/AUD 1.6567
  • GBP/NZD 2.1445
  • GBP/CAD 1.5496
  • GBP/HKD 11.574
  • GBP/ZAR 11.413
  • GBP/JPY 133.05
  • EUR/USD 1.3509

Sterling drops
The pound saw it’s biggest one day drop in a year yesterday. Polls showed that the Labour government may win the election, and the fact that David Cameron has only a 2 point lead, versus a man who many media outlets are politely saying has ‘personality issues’ mean the outlook for the UK is not good. Many can’t understand this fact, and to be honest neither can I.

If Labour win the election, it’s likely they will continue their plan of borrowing huge amounts of money to pump into the economy, and have little plan to actually try and reduce our deficit. The markets reacted accordinly and we saw massive selling of Sterling across the board.

Market participants also used weaker-than-expected data on UK mortgage approvals as another reason to knock the pound to a three-month low against the euro, leaving it at an 11-month trough versus major currencies.

“Sentiment on sterling is very bad at the moment. Given half a chance, people will just sell it,” said Paul Robinson, chief sterling strategist at Barclays Capital in London.
“Election uncertainty is going to persist, I don’t think the MPC is suddenly going to change its tune (on the possibility of resuming quantitative easing) … I can’t see anything changing sterling’s prospects in the short run.”

Analysts said they expected sterling to stay under selling pressure against the euro, while acknowledging that gains in the euro may be limited by the single currency’s weakness against the dollar due to ongoing concerns about Greece’s debt problems.

Forecasts from UBS today forecast the pound will fall to parity on the Euro, and as low as $1.05 against the US Dollar. Not good news if you need to buy currency with Sterling.

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