Goldman is advising clients to buy the pound against the euro Photo: PA  Foreign-exchange markets are already “comfortable” with the possibility of a coalition government because all the parties agree that Britain’s deficit must be cut, analysts at Wall Street’s powerhouse argue. Goldman recommends buying the pound against the euro in the expectation it will strengthen to 83p - its strongest since November 2008.  “Overall, a hung parliament would surely come as less of a shock than it might have done some months ago... Sterling could rally further, in particular against the Euro, where Greece-related risk factors remain high on the agenda,” the analysts said  The possible reaction from financial markets has become a key battleground in the run up to election. On Wednesday the Conservatives warned that a hung Parliament would rock the pound so severely that it could result in intervention from the International Monetary Fund (IMF). Kenneth Clarke, the Conservative Party’s Business Secretary, said: “The bond markets won’t wait for all the discussions and horse trading. Sterling will wobble. If Britain doesn’t deliver a Government a working majority, markets don’t think that we can tackle the problem, then the IMF will have to do it for us.”  The view, that was backed by David Cameron and George Osborne, was dismissed as “scaremongering” by Labour and the Liberal Democrats.  Goldman said it had “long held the view UK growth is better than some of the official data portrays” but had “refrained from expressing this view through foreign exchange” recommendations because of the uncertainties around a hung Parliament.  The analysts said that the argument for growth had strengthened, particularly since the Bank of England now “sounds less worried about growth and more worried about inflation, possibly an indication of a shifting stance in line with our forecasts.”  Meanwhile concerns over the outcome of the election have eased. The analysts said: “Late February polls started to show an increased likelihood of a “hung parliament” and this led to a notable sell-off in Sterling. But since then it appears foreign-exchange markets have become a lot more comfortable with the prospect of a possible coalition government. This may also be due to the fact that all key parties seem to support a degree of fiscal consolidation in the foreseeable future.”  The analysts added: “Moreover, following the first television debate the polls are now generally consistent with a minority government, of one kind or another.”  The euro traded at 86.84p in London this morning.  Transfer money commission free with Telegraph International Money Transfers
Goldman Sachs has advised its clients to buy sterling because fears that a    hung Parliament will trigger a fall in the currency are overblown.