If the Great British Krona had a vote, it would definitely be going towards the Conservatives.
We’re being facetious of course; currencies don’t have political preferences, or consciousness for that matter. But something they do have — and increasingly in the case of sterling — is correlation.
To wit, the below chart from RBC Capital Markets’ Adam Cole:
That’s the Bank of England’s sterling trade-weighted index versus the UK Conservative Party’s lead over Labour in what Cole describes as a rolling two-week “poll of polls”.
According to the analyst then, a huge part of the currency’s most recent weakness is down to rebounding support for Labour, and the associated increased risk of a hung parliament.
Full RBC note, plus a Nomura UK elections-fest, in the Long Room.
Related links:
Vampire squid really quite confident on sterling – FT Alphaville
The UK’s heading one (AA) way, Citi says – FT Alphaville
A frugal policy is the better solution - FT