U.K. Pound Gains in Currency Trading

After struggling last week, the sterling appears to be gaining the upper hand in forex trading today. Indeed, the announcement by Liberal Democrats that they would be willing to form a coalition government with the Labor Party is providing some support for the U.K. pound in currency trading.

Nick Clegg, the leader of the Liberal Democrats, is offering to set up a coalition government in order to avoid a hung Parliament in the event of a probably three-way tie in the upcoming British elections. Labor just has to agree to let Clegg be Prime Minister. The news appears to be heartening British investors and encouraging forex traders around the world.

However, cautions GFT's Boris Schlossberg in FX360, this optimism for the sterling in forex trading should be tempered by reality:

For the time being the market appears to be giving the benefit of the doubt to this scenario with cable hitting a fresh high of 1.5500 in early morning London trade. However, with election only 10 days away the situation remains fluid and high volatile and if the market senses that the result of the UK election will devolve in to a long protracted political battle, cable gains could evaporate quickly.