Sterling 'inevitable' focus of markets

An investment expert has suggested that it is "inevitable" that sterling will become the main focus of foreign exchange markets in the run up to the general election.

Stuart Frost, co-fund manager of Threadneedle's Absolute Return Bond Fund, explained that the political pressure on the pound was likely to push it into the limelight.

However, Mr Frost noted that the "lack of isolation" was likely to see things play out differently to previous periods of sterling pressure.

"After all, past sell offs in sterling occurred when there were clear cut alternatives, such as the US dollar or the euro. But the euro has struggled of late with its own set of problems and the dollar is only just on the turn after a period of excessive weakness," said Mr Frost.

He added that China's renminbi currency "would be an alternative, but such is China's reluctance to move in the face of economic reality that it is not compellingly attractive".

The effect of the political swing in the election polls has already become the focus of many currency strategists as the political uncertainty leads traders to worry about the financial policies which may or may not take effect following the general election.

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Posted by Chris Barber