Labour win would hurt the pound

THE pound soared to fresh highs against the euro yesterday despite warnings that the General Election could drive it lower.

Sterling powered towards €1.38 – a level not seen since late 2007 – giving British families more bang for their buck on the Continent.

But analysts warned that the currency is likely to come under pressure as the May election nears – particularly if the polls point towards a Labour victory.

It is feared that a Left-wing Labour government or Labour-led coalition would water down austerity, borrow more and spend more, hitting the pound.

‘We expect politics to matter a lot for GBP [the pound] as the election gets closer,’ said Adam Cole at RBC Capital Markets in a report.

He said ‘rising Conservative support would be GBP-positive heading into the May election’ while a swing to Labour ‘would generally be GBP-negative’.

But Cole warned that a majority Conservative government could also damage the pound if it leads to Britain leaving the European Union.

‘It feels like the electoral risks are finally coming into focus,’ said Michael Sneyd, a strategist with BNP Paribas in London.