Labour party’s no coalition with SNP would drag drama longer

Facing harsh criticism from Conservative party over its possible coalition with Swiss National Party (SNP) post-election, Labour Leader Ed Milliband announced that his party will not seek coalition with SNP post-election.

This might gain Labour leader few extra points over Conservative party leader David Cameron, however in reality increased uncertainty.

• As of latest poll results, both of the main contending Conservatives and the Labours are running neck to neck and possibilities are high that both parties will fail to garner outright majority in the parliament.

Ed Milliband might move for a minority government post-election and it will be up to SNP whether it want to risk bringing down the government or support it from outside.

Impact on Pound -

• Pound over the last week was the top performing major, trading close to 1.516 now. Latest move came from broad based dollar weakness and less dovish minutes from Bank of England (BOE).

• Implied volatility against dollar and Euro remain high and premiums skewed to the downside.

• Latest announcement by Labour leader suggests that drama will drag longer in turn more volatile days for pound.

• As of now bulls remain in clear control, however they risk sharp selloff ahead. 1.53 area would be tricky with FOMC providing direction to dollar through monetary policy this week.