The most closely-fought UK general election in a generation is prompting signs of uncertainty in financial markets, with investors clamouring for insurance against sharp swings in the value of the pound.
With less than a month before the election and little separating the two main parties in the polls, the currency market has registered a pronounced rise in short-term volatility, suggesting investors are preparing for elevated political uncertainty.
Market measures of volatility of the pound against the euro and the dollar have reached levels not seen since the formation of the current coalition government. The currency market often sets the tone ahead of bonds and shares, as a forerunner of broader market turbulence, notably last year ahead of Scotland’s vote on independence. For now, UK government bonds and share prices have not been affected by the election but that may change as May 7 nears.