This week David Bloom (Head of FX strategy for HBSC) told Bloomberg that UK politics in 2015 will make the Scottish referendum “look like a Sunday picnic”. With the General Election in May 2015 this poses a massive risk in the medium term to the Pound.
Last week UKIP won its first parliamentary seat (Clacton). This is significant as it is forcing market participants to take the possibility of Britain’s exit from the EU more seriously.
Ipos Mori (market Research) released its opinion polls on the 15thOctober in reference to the election:
As it stands, if the election was today the result would be as follows:-
Labour = 33%
Conservatives = 30%
Lib Dem = 8%
UKIP = 16%
This may leave UKIP leader Farage in a position of power as there would be no majority, resulting in yet another coalition. Farage could potentially be able to negotiate UKIP’s way into power and could hold the post of Deputy Prime Minister; much like Nick Clegg with the Liberal Democrats.
The main factor surrounding the political concern is the referendum on EU membership. The Conservatives are promising a referendum in 2017 if they get into power, UKIP want this vote earlier.
Markets do not like political uncertainty and this could be another catalyst in 2015.