Threat of General Election Pressures Sterling

The Pound Sterling came under pressure against the greenback and Euro on speculation that the Prime Minister will face a challenge from the Labour Party in a general election vote. Theresa May has already low two crucial votes, and the looming Parliamentary vote on her proposed plans for the Brexit could be the final nail in her coffin. The head of the Labour Party, Jeremy Corbyn, is ready to call for a general election if the Prime Minister does not find enough support next week. With consideration that a Corbyn-led government would be more likely to enact policies that were viewed as “high spending,” the Pound was pushed lower by FX traders.

As reported at 11:47 am (GMT) in London, the EUR/GBP was trading at 0.9050 Pence, a gain of 0.30% and off the session peak of 0.90594 Pence; the low for the trading day was recorded at 0.90210 Pence. The GBP/USD was trading $1.2735, down 0.4738%; the pair has ranged from a trough of $1.2728 to $1.2801.

Fears of Hard Brexit Recede

The only saving grace for the Pound right now is that the government must have a back-up plan if Theresa May's vote in Parliament falls short. That vote is scheduled to take place on January 15th. Currency strategists say that the fact that the Parliament itself is taking a more assertive role in the Brexit plans should give traders hope that a hard Brexit is now less probable and that a more positive outcome can be seen in implied volatility which has been reduced drastically over the past few weeks.

Barbara Zigah is a freelance journalist living in Ghana, who specializes in Forex-related content; her online work has appeared in the IB Times, NASDAQ, Benzinga, and Seeking Alpha.