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The Accumulator: tough week for pound as polls tighten

The prospect of a hung Parliament saw sterling retreat while FTSE 100 modestly extended its impressive 12-month gains.

 
The Accumulator: tough week for pound as polls tighten

It’s been a tough week for the pound as currency markets have responded to polls showing a narrowing Conservative lead following the botched social care policy proposal as we head towards next week’s general election.

The Accumulator, our exclusive stock market data table (see link below), shows the US dollar, Japanese yen and euro all made gains at the expense of sterling in the week to yesterday’s close.

Since the EU vote a year ago we have all grown used to the UK stock market doing well when the pound is weak. This week’s rise has been modest, a gain of 0.4% extending the year to date advance to 7.7%. However, our one-year data show the strength of the post-referendum rally with the FTSE 100 up 26.8%.

Alastair Gunn, manager of Jupiter Distribution fund, says the fall in the pound reflects concern the Theresa May will not get the big majority she wants to strengthen her hand in the Brexit negotiations.

‘Instead of the 100 plus majority some thought the Conservative party could achieve, markets, in our view, are clearly pricing in something more modest – a majority of 50 seats or more. And there is still plenty of time for that lead to shrink further,’ he said.

Gunn believes this means a ‘hard Brexit’ where the UK leaves the European customs union is still the most likely outcome of the Tories being returned to power. ‘In short, the outcome of this month’s general election does little to alter our view that the companies we invest in need to prepare for the UK’s full exit from the European Union.

‘Transitional arrangements where we see trade deals on a sector-by-sector basis may soften the blow; a full customs union however looks unachievable given the EU’s insistence that full freedom of movement for its citizens remains a condition sine qua non to obtain that privilege,’ he said.

Our weekly Accumulator table shows the returns for UK investors of all the world markets and asset classes.

You can access The Accumulator here.

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