Main test to sterling will come after the election

Sterling has been buoyed this morning against the euro as investors shy away from riskier assets, concerned over the sovereign debt crisis in the Eurozone. Despite the risk of a hung parliament outcome in the UK polls tomorrow, there has been little pressure on the pound this morning.

Mark Bolsom, Head of the UK Trading Desk at Travelex, the world's largest non-bank FX Payments Specialist, said, "There has been a lot of speculation about a hung parliament and that the pound will freefall against most major currencies if it does come to pass.

"Personally, I think this is very unlikely and I don't think the damage will be as bad as widely feared. Certainly, I'd expect some turbulence against the dollar and euro tomorrow but sovereign debt fears in the Eurozone will help keep the pound stable.

"It is also very likely that the markets have already priced in a hung parliament, as opinion polls have long pointed towards this outcome.

Bolsom comments, "The real test to the pound will come after the election. If a hung parliament does happen and the main parties cannot cooperate to form a credible deficit reduction plan, the pound will suffer. Potentially we could see it fall to 1.15 against the euro and under $1.50 against the US dollar."