The pound will fall to 1.20 against the U.S. dollar if the UK election delivers a hung parliament, predicts the CEO of one of the world鈥檚 largest independent financial advisory organisations.
The prediction from Nigel Green, the founder and chief executive of deVere Group, comes following new polling that indicates that Jeremy Corbyn鈥檚 Labour is closing the gap on Boris Johnson鈥檚 Conservatives in next week鈥檚 general election.
Kantar demonstrated an increase of 5 per cent for Labour, meanwhile Ipsos MORI flagged a gain of 4 per cent, with the influential YouGov polls showing an increase of 2 per cent.
Mr Green says: 鈥淭he overwhelming majority of polls tracking the UK election clearly suggest growing support for Labour.
鈥淭he surge for Labour in the recent polls, which raises the spectre of another hung parliament, has been reflected by the dip in the pound against the dollar, the euro and other major currencies.
鈥淪terling fell 0.2 per cent to $1.29 on Monday with the odds on a hung parliament being delivered next week narrowed to as low as 7/4 – down from 9/4 last week.鈥�
He continues: 鈥淚 think we can expect the pound to fall to $1.20 in the event of another hung parliament.
鈥淪hould a Conservative majority be delivered, I believe the pound will reach $1.35.
鈥淎 hung parliament is likely to lead to another EU referendum and another Scottish independence referendum.
鈥淭his would intensify uncertainty perhaps into 2021. Uncertainty is something financial markets loathe and this is why the pound has dipped on the news of Labour closing in on the Conservatives ahead of this crucial Brexit election.
鈥淭he uncertainty would also serve to continue to dampen business investment which, of course, will drag on economic growth.鈥�
He goes on to add: 鈥淭he significant drop in the value of the pound could contribute to reducing people鈥檚 purchasing power and a drop in UK living standards. Weaker sterling means imports are more expensive, with rising prices being passed on to consumers.
鈥淎 low pound is also bad news for British expats who get a UK pension or UK income 鈥� plus it鈥檚 bad for holidaymakers and travellers abroad – with trips to Europe and the U.S. becoming increasingly more expensive.聽 Even destinations such as Dubai and China are more expensive as their currencies are pegged to the U.S. dollar.鈥�
The deVere CEO concludes: 鈥淲hile it is most likely that a Conservative majority will be delivered, next week鈥檚 election is looking like it will be closer than many had expected at the beginning of the campaign.
鈥淪hould Mr Johnson鈥檚 Conservatives win the election, the pound and UK financial assets stand to gain with immediate effect.鈥�
