GBP/USD likely to come under increasing downward pressure

GBPUSD is likely to come under increasing downward pressure as investors sharpen their focus on pronounced UK political uncertainty in an environment of broad USD strength. 

The 7 May election is just over four weeks away and the range of possible outcomes remains as wide as ever. 

This will likely support an environment of high GBP volatility and weaker GBP spot. Opinion polls, on average, have shown no discernible change following the recent seven-way leaders' debate and Jeremy Paxman's interviews with Prime Minister David Cameron and Labour leader Ed Miliband. 

"Most election projections continue to indicate a hung parliament is highly likely, with neither major party likely to be able to form government with fewer than two coalition partners, much less secure an outright majority", says Barclays. 

As such, the resultant range of market implications is broad, including prolonged political deadlock, snap elections, an EU referendum and variations on the fiscal consolidation path, which is important for the pace of Bank of England (BoE) policy normalisation.