Political concerns weigh Sterling down

The Pound has lost ground today as political concerns and the prospect of the Bank of England’s policy meeting later in the week weighed down Sterling.
 

Two UK opinion polls over the weekend showed a general election, which has to held by June, would result in a hung parliament.

This weighed on sterling since many believe that such a result would lessen the likelihood of the UK getting to grips with its rising budget deficit.

Meanwhile, traders were wary ahead of the result of the Bank of England’s monetary policy committee meeting on Thursday.

By midday in New York, the pound fell 0.9 per cent to £0.8740 against the euro, lost 0.1 per cent to Y144.21 against the yen and fell 0.6 per cent to $1.5902 against the dollar.

Meanwhile, the dollar hit a six-month high on a trade-weighted basis, consolidating sharp gains after US growth figures came in stronger than expected last week. 

The figures helped give the dollar an additional boost given that the US currency was already benefiting from increased risk aversion.

Safe haven demand for the dollar was boosted as fears over Greece’s fiscal position and concerns over continued Chinese monetary tightening weighed on risk appetite and global equity markets.

The dollar index, which tracks its progress against a basket of six leading currencies, rose to a high of 79.534, it highest level since July 30. The dollar also rose to a six-month peak of $1.3850 against the euro before paring some its gains to stand down 0.3 per cent at $1.3905 and climbed 0.5 per cent to Y90.77 against the yen.

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