ABU DHABI (BLOOMBERG) - The outcome of Britain's election next month poses a binary choice for the nation's currency, according to the largest UK bank.
"Nothing is priced in," said Mr David Bloom, global head of foreign-exchange strategy at HSBC Holdings, in an interview with Bloomberg Television from Doha. "The political outcome will determine the future of the currency."
An election result that paves the way to a UK-European Union deal on Brexit could send the pound up to US$1.45 by the end of next year. Or a no-deal Brexit could see it tumble to US$1.10, from just below US$1.30 now.
The pound was trading at US$1.2967 at 3:30pm on Tuesday, up nearly 2 per cent on the US dollar to date this year.
Any resolution is good, Mr Bloom said, either it be another referendum or a Brexit deal. Political wrangling will start to ebb away, the economy could get a fiscal boost and the Bank of England could start considering rate increases. The reverse could see recession fears flare.
Among three election scenarios, a hung Parliament - where neither Prime Minister Boris Johnson's Conservatives nor opposition leader Jeremy Corbyn's Labour party gets a majority - would be the worst for the currency, Mr Bloom said.
In that case, there would be no majority of lawmakers in favour of a fresh referendum on Brexit, nor favouring any specific Brexit deal. "We could be back in the mud" and "lost in the wilderness".
While polls suggest a Conservative majority now, the voting scenarios for the Dec 12 elections are complex, according to Mr Bloom.
"It's still completely open - anything can happen," the strategist said.