Pound Rises On Poll Result

The pound is up this morning on the back of an opinion poll showing that the Tories would have an outright majority at the next election.

The poll, by Angus Reid, pegs the Conservatives on 39% some thirteen points ahead of Labour on 26%.

Sterling is subsequently up to the dizzy heights of 1.5160 against the dollar.

With more polls undoubtedly out in the Sunday papers this weekend things could easily have a different complexion on them again Monday morning. Perhaps the only thing we can say with a fair degree of certainty is that more volatility is likely to be in store for the pound between now and May.

In some ways there are similarities to be drawn between sterling and the wheat market. Whilst rallies are quickly sold into and the overall trend is undeniably downwards, every man and his dog has managed to spot that and are subsequently short.

This leaves both wheat and the pound vulnerable to a sudden surge of short-covering for little apparent fundamental reason. Gordon Brown wears a new tie and kisses a baby, whoosh we are back to 1.55 before you know it as buy stops kick in.

In Chicago, spec money is close to having the largest open short position on record. May wheat set a fresh five-month low of USD4.75 1/2 yesterday, within spitting distance of the lifetime low of USD4.72 set in October. Once we break through that into "uncharted territory" then the market could be susceptible to a corrective rally with very little excuse. Who wants to short it at the bottom of the market?