British Pound Advances after Farage Boosts Odds of a Conservative Majority on Dec. 12

The British Pound opens the new week close to recent levels against the Euro, U.S. Dollar and other major currencies, but some short-term volatility could be introduced into Sterling exchange rates should today's economic data release provide a surprise.

If the result of the next general election is a Conservative win with a majority the British Pound will rise substantially versus the U.S. Dollar, reaching as high as 1.35, maybe even 1.40, says Peter Kinsella, global head of FX strategy at Union Bancaire Privee.

Pound Sterling was in retreat Thursday after the latest interest rate decision revealed dissent on the Monetary Policy Committee (MPC) Bank of England (BoE), with some rate setters having voted for an immediate reduction in borrowing costs in order to support the slowing economy. 

The British Pound is seen trading softer against the U.S. Dollar on Tuesday, but is holding familiar levels against the Euro as a multi-week recovery is put on hold by the General Election campaign.

"GBP has scope to edge higher against most major currencies. Recent polls of voting intentions show the Conservative party’s lead is widening and they could achieve a majority government" - Kim Mundy at CBA.

The British Pound strengthened on the final day of trade in October, amidst polls showing that the Conservative Party maintain a comfortable lead, that if maintained could deliver a majority Government for Boris Johnson.

With Parliament agreeing a December 12 election, the door to a period of fresh political uncertainty is now open for Sterling.

The strong upside momentum seen earlier in October has certainly faded, with traders and investors eyeing a General Election campaign in the lead up to Christmas as being a reason to remain cautious on the UK currency.