Political uncertainty surrounding the UK election is taking its toll on the pound, with the cost of protecting against wild swings in the currency on the rise. Kirsty Basset reports.
The pound is under pressure. Sterling fell to a five year low against the dollar following weaker than expected industrial data. But it's the upcoming UK election, and the prospect of no single party wining overall control, which is really making investors nervous. NAB Markets Strategist Nick Parsons says markets have been slow to react. (SOUNDBITE)(ENGLISH) NICK PARSONS, HEAD OF EUROPEAN MARKETS STRATEGY, NAB, SAYING: "Markets are beginning to be nervous ahead of the election but in the same way that it took them quite some time to be nervous about the potential outcome of the Scottish referendum in September last year." Bets on how volatile the pound will be have risen sharply - and that's driven up the price of buying insurance against swings in the currency. And the pound could be in for a bumpy ride ahead. (SOUNDBITE)(ENGLISH) NICK PARSONS, HEAD OF MARKETS STRATEGY, EUROPE SAYING: "We expect this pressure to continue because the one thing that seems to be for sure in this election is uncertainty on a scale we've never seen before." Whether the major parties will be able to form a government remains to be seen - with both the Scottish Nationalists and anti-EU party UKIP doing well in the polls. There's also the risk of Britain leaving the EU in coming years, as the Conservatives, under pressure from UKIP, have promised a referendum on the issue if they win.