Fundamental Updates \Nick Nasad \ 9:39 AM EST \ March 1st, 2010
The Pound tumbled to start this week as polls in the UK showed that the Britain may have its first minority government since 1974. That would mean a strong chance of a “hung Parliament” or one in which no one political party has an outright majority of seats, and it means it is most commonly equally balanced. That will complicate efforts by UK officials to push through policies that will help to reduce the nation’s debt. The polls showed that the lead enjoyed by the Conservatives narrowed with that of the Labor party, the party of the current Prime Minister Gordon Brown. The Conservatives have called for spending cuts to start this year.
Investors are concerned about ballooning budget deficits as the concern surrounding Greek budget deficits have now spanned several months. In the UK the deficit is running at more than 12% of GDP, which is on par with the shortfall seen in Greece. Standard & Poor’s and Moody’s Investors Service said Greece faces downgrades as early as next month. While that may not be the case with the UK, if government becomes gridlocked and too weak to control the UK debt then that could happen. In a sense that possibility was being priced into the markets in today’s session.
The Pound tumbled against the Dollar, falling below the 1.52 level which had set up as support late last week, and plunging to test 1.4780, a swing of 400 pips. It was the first time in 10 months that the Pound was trading below 1.50. The EUR/GBP pair surged above the 0.90 area in a 190 pip move hitting a high just below 0.9150. The GBP/JPY meanwhile broke below 134.50 to an intra-day low at 132.
Pound Drops Sharply on Poll Results
Fundamental Updates \ Nick Nasad \ 9:39 AM EST \ March 1st, 2010The Pound tumbled to start this week as polls in the UK showed that the Britain may have its first minority government since 1974. That would mean a strong chance of a “hung Parliament” or one in which no one political party has an outright majority of seats, and it means it is most commonly equally balanced. That will complicate efforts by UK officials to push through policies that will help to reduce the nation’s debt. The polls showed that the lead enjoyed by the Conservatives narrowed with that of the Labor party, the party of the current Prime Minister Gordon Brown. The Conservatives have called for spending cuts to start this year.
Investors are concerned about ballooning budget deficits as the concern surrounding Greek budget deficits have now spanned several months. In the UK the deficit is running at more than 12% of GDP, which is on par with the shortfall seen in Greece. Standard & Poor’s and Moody’s Investors Service said Greece faces downgrades as early as next month. While that may not be the case with the UK, if government becomes gridlocked and too weak to control the UK debt then that could happen. In a sense that possibility was being priced into the markets in today’s session.
The Pound tumbled against the Dollar, falling below the 1.52 level which had set up as support late last week, and plunging to test 1.4780, a swing of 400 pips. It was the first time in 10 months that the Pound was trading below 1.50. The EUR/GBP pair surged above the 0.90 area in a 190 pip move hitting a high just below 0.9150. The GBP/JPY meanwhile broke below 134.50 to an intra-day low at 132.
See this Active Chart of GBP/USD pair: