The papers are predicting " Election to trigger a sterling explosion" They expect the GBP to go up to near $1.45. What effect is this likely to have on UK and World share prices and Bond ETFs?
Interesting forecast. Approximately 70% of the FTSE gets its earnings in dollars so the share price of such companies is likely to fall 1% for each 1% gained by the GBP. Those of us holding US equities will see a similar fall in the value of our US investments - even if the S&P 500 is unaffected. Those of us invested in US treasury or corporate bonds via ETFs will see a similar fall in the value of our investments. The increase in the strength of the GBP is likely to have a relatively neutral affect on the FTSE 250 which is less linked to the USD. Since commodities like oil and precious metals are priced in dollars, we will see a fall in the values of our holdings. A fall in US interest rates will also strengthen the pound and all other foreign currencies relative to the USD in proportion to the interest rate cut. The effect of a strong pound on world share prices outside the US is harder to predict. But it will in general be cheaper for UK investors to buy global equities and bonds, and also most commodities.
