Business BitesFeatures

Want to know who will win the election? Watch the pound

In recent years there has been a lot of talk about how badly wrong pollsters can get it. Nobody thought Trump would win, nobody thought Leave would win the referendum, indeed even elections have been too close to call.

Though it now feels like a different historical epoch to look back to 2010, then the pollsters were predicting a Conservative landslide that did not materialise – remember Clegg and Cameron having to do their Morecambe and Wise act in the rose garden?

Related Articles

This election, there are twin tenets of received wisdom. First is that the Tories are on for a comfortable win, second is that the election is volatile and we cannot be sure.

Not very helpful, is it? So where to look for something more concrete, a better bellwether on which to make your decision down at the bookies? My recommendation would be the pound sterling.

It’s important to remember that the City of London’s financial services industry employs armies of ‘analysts’, whose job it is to read the runes all day and provide the trading floor with some mathematically sound, triangulated predictions and probabilities of what will happen next. That helps them make decisions about what stock and commodities to buy or offload.

When it’s not an election, this information can be anything from a major manufacturer going bust somewhere else in the world affecting the supply chain for a business they are invested in, or a Middle Eastern country descending into political turmoil affecting the oil price.

I am no psephologist, so like most people I cannot completely get my head around how ‘swing’ works in elections, or how 42% of the national vote can deliver a thumping majority for one PM, but a hung parliament for another.

Also like most people, I do not have time to try to divine how a party is performing in all the marginal seats they need over the course of the election campaign, and as I’ve said, polls are often wrong even when the race does not appear that close. This is where the pound sterling comes in handy.

Right now, it’s at a 31-month high against the euro, touching €1.19 for the first time since May 2017, just before the Tories lost their majority in Theresa May’s snap election. This suggests unmistakably that the City is confident of a Boris Johnson victory.

To reiterate, it means traders both at home and internationally have been willing to buy British currency at higher prices than any other time in almost three years. Currency value is seen as the ultimate measure of investors’ confidence in the future performance of a nation’s economy. So if they’re buying, and the price is climbing, it means they think the future is rosy. Or rosier than it was anyway.

So with that, I will throw my hat in the ring. My money’s on a solid Boris Johnson majority on Thursday. Whatever your politics, the City thinks a Tory win will be good for business, and a win on Thursday may bode well for your bottom line in the coming five years.

Back to top button