Cracks appear in UK governing coalition as election looms

• UK is about face its most uncertain election at least in 100 years according to political analysts. The tentative date for the election is May 7, 2015.

• Current coalition government between the conservative party and liberal democrats led by Prime Minister David Cameron is struggling with common agenda as the election looms ahead. In this year's contest, the other major contender is the labour party led by Mr. Ed Milliband.

• Significant disparity exist in two areas, how to tackle the fiscal deficit of UK and Britain's position in European Union.

• UK, namely London remained over the years the financial capital of the world when it comes to FX market and over the counter derivatives like Interest rate swap. With increase in global regulations namely in the US through Dodd - Frank has prompted firms to operate more from London, increasing its share in the mentioned market.

• Liberal democrats are planning for a tax rise namely on the back to cover for UK's need for spending whereas the conservatives are looking to tighten belts and to cut back on tax avoidance. A tax rate hike has high probability of hurting the pound and may prompt capital outflow.

• The liberal democrats also publicly announced their opposition against any European Union membership referendum that Mr. Cameron announced for 2017 should he win the election.

As the political risk rises in the horizon, pound at some point ahead is expected to face headwinds from the development.