Pound Rollercoaster After Last Poll Suggests Hung Parliament Remains Likely

Tomorrow, British voters will head to the polls to cast their ballots in a federal election that will decide the fate of Brexit. According to the latest poll, a strong lead held by the Conservative Party - the party of prime minister Boris Johnson - has started to dissipate, underscoring the notion that turnout is going to be critical for this election.

And the last YouGov poll before the election happens confirmed that Boris Johnson's Conservatives still have a strong lead, but it didn't rule out the possibility of a hung parliament.

According to the FT, a comprehensive survey by the pollsters at YouGov found that the Tories are set to win 339 seats on Thursday, with Labour set for 231, and the Liberal Democrats for 15 and the Scottish National party for 41. According to the FT's analysis of the polls, the latest poll showed that his majority had shrunk to just 28, down from 68 in earlier polls.

The model predicts that seats in the north of England, including Bishop Auckland, Great Grimsby, Don Valley and Ashfield, parts of Labour's infamous "red wall," could turn blue for the first time in history.  Meanwhile, in London, the Conservatives are expected to hold on to seats such as Putney and Wimbledon in south London.

As if the possibility of losing the heartland isn't enough of a referendum on Jeremy Corbyn's leadership abilities (his far-left agenda calls for a serious reshaping of the British economy), Labour is also trailing in the typical marginal seats that the party would need to win to secure a majority. These include several constituencies currently held by Labour, including Lincoln, Crewe and Nantwich, which are forecast to flip. 

Contrary to what one might expect, the conservative leadership will probably welcome the poll showing a drop in Johnson's margin of victory, since they're afraid of everyone getting complacent.

“We have to keep everyone focused on the prize, we can’t afford to give up now,” said one cabinet minister.

Because the poll, as we mentioned earlier, still leaves open the possibility of a hung parliament.

In a hung parliament, the largest party fails to form a coalition with its rival parties, leaving the UK without a functioning government. If the impasse can't be broken, the British people could be asked to return to the polls for another vote.

Bloomberg has compiled forecasts for how various election scenarios, including the hung parliament, might impact the pound.

Source: Bloomberg

In response to the poll, the pound weakened to $1.3107, according to Reuters, before rebounding.

Johnson advisor Dominic Cummings warned Brexit activists not to be complacent. "The polls might say Boris is going to win, but don't believe them," he wrote Wednesday evening in a blog post.

As we've pointed out before, there is precedent for that.