subject: Uk Elections Confuse The Sterling Forex Markets [print this page] Sterling has been seeing some quite big swings in the run up to the UK Election and it does not look like the markets have quite settled down.
The Pound has come in for something of a battering as a media obsessed Britain were polled and voted a modern politician, who has actually never done anything except look good on TV, as being more popular than Churchill.
Of course you never know what is going to happen, especially if the Liberal Democrats gain some traction as the election unfolds. If a flow of votes leaves the two major parties we could be in for an historic event.
According to Angus Campbell of Tradefair It seems that the Liberal Democrats may well have a bigger hand in the election than had been predicted. Whilst I am not as negative on a hung parliament as some, this is based on the Liberals having a very small voice.
If they have more than a nominal role, their policies can do little to help Britain out of its current malaise as they are mainly based on giving more hand outs and taxing the top end.
Politicians seem to believe that business and high earners will just sit back and do nothing in the face of attack. In todays world, income and expenditure can be transferred across the globe to the detriment of any administration trying to grasp more than its fair share.
The markets have naturally preferred the traditionally more fiscally responsible Conservative Party. Whenever the Conservative Party looks like it will win the forthcoming election the Pound gains ground on the Euro and the Dollar. With a hung parliament becoming more likely Sterling has dropped.
After the first TV debate between the three leaders, ie the debate that the Liberals Nick Clegg clearly won, the Sterling/Dollar rate dropped over 1.5 cents.
Investors will not like streams of news showing unexpected results and dealers will avoid uncertainty. The possibility of a new party in power for the first time in a century does fall into the category of uncertainty.
Having said all this you can of course take advantage of the volatile forex markets.
With financial spread betting you are able to 'short' a market and this provides interesting opportunities. You are not limited to solely speculating on markets to go up. If your research suggests that the Sterling/Dollar pair will go down you can speculate on it to go down. If your research indicates that the Sterling/Dollar pair will go up you can spread bet on the pair to go up.
Not only that but political events occur throughout the day and night. When the closing bell sounds, not all spread trading markets will close. So whilst the New York, Frankfurt and London stock exchanges may close many important markets remain open. Some markets like the FTSE 100 and GBP/USD remain open throughout the night with spread betting companies like FinancialSpreads.com.
Please note this warning though, if you spread bet you can lose more than your initial investment. Ensure that spread betting matches your investment objectives. Spread betting does carry a high level of risk. Familiarise yourself with the risks. Where necessary, seek independent advice.
