The pound swung wildly yesterday as nervous traders fretted over the outcome of the election amid a deluge of contradictory opinion polls.
Sterling dived 0.7 per cent to below $1.28 before surging back up 1.2 per cent above $1.29 as researchers predicted everything from a hung Parliament to a solid Tory victory.
The pound’s weakness temporarily pushed the FTSE 100 to a new all-time high of 7585.68 just after 1pm.
Sterling dived 0.7 per cent to below $1.28 before surging back up 1.2 per cent above $1.29 as researchers predicted everything from a hung Parliament to a solid Tory victory
A rise in the blue chip index is common when sterling drops because many of its stocks earn profits in foreign currencies, which are then worth more back home.
But the FTSE 100 fell again in later trading as the pound gained on fresh polls suggesting the Tories were retaining a wide lead over Jeremy Corbyn’s Labour.
It closed the day down 0.1 per cent or 6.56 points at 7519.95. This still meant the index ended May 4.5 per cent up, its best monthly run since it rose 5.3 per cent in December last year.
There were similar swings across the Atlantic, where the technology-focused US Nasdaq opened up 12.73 points at a new record of 6215.92 before later falling.
Joshua Mahony, market analyst at spread betting company IG, said: ‘The UK election has become the number one topic on the minds of traders given the narrowing polls, with voters having to decide between socialist and capitalist ideals.’
Connor Campbell of Spreadex said: ‘You can tell the election is just over a week away, as the market has been abuzz with volatility.’
The drama began as the City panicked over a controversial YouGov prediction suggesting the Conservatives could lose 20 seats while Labour made gains
The drama began as the City panicked over a controversial YouGov prediction suggesting the Conservatives could lose 20 seats while Labour made gains.
This outcome could foist a new coalition government on Britain and throw Brexit negotiations into chaos, with potentially serious economic consequences.
It triggered a sharp sell-off, taking sterling to its lowest level of the day. But other polls then suggested the situation was brighter for the Tories, with Kantar and TNS both showing leads of 10 percentage points, causing sterling to rally sharply.
Most traders are so concerned by the risks of a hung Parliament that the slightest hint of weakness is enough to send them running for the hills.
Kathleen Brooks of City Index dismissed the YouGov research, saying: ‘Other polls are predicting a completely different outcome, so we would use this information with a pinch of salt.’