A “shocking” poll by YouGov shows that the elections in the UK will result in a loss of seats for the Conservative Party. According to the poll for the Times, Theresa May’s party will likely fall short of 326 seats needed for an absolute majority.
May announced the snap election on the premise that she would easily win, receiving a personal mandate and enlarging her majority. Markets had hopes that with a wide margin to maneuver, May would make a U-turn on her Brexit stance and opt for a soft Brexit.
Here is the YouGov poll:
So far, her U-turn on the “dementia tax” has cost her support. Domestic topics were pushed aside after the terrible Manchester attack, but these topics curb support for the Tories.
It is important to note that polls vary in their degree of lead for the Tories. An ICM poll for the Guardian also shows a narrowing gap, but it still stands at 12%, enough for an absolute majority and even for a larger one.
The differences in the results stem from the gap in turnout models. The polls showing a narrow lead for CON assume a wide turnout of older people, similar to voting patterns seen in the 2015 elections. Those showing a smaller gap take into account the high number of younger people that registered to vote. Younger people lean more towards Labour.
GBP/USD hung on a hung parliament
The pound was happy with the announcement of the elections and did not assume any other option but a Conservative victory. A hung parliament could result in weeks of coalition negotiations, pushing back the Brexit negotiations.
The reaction in the markets was a fall of the pound. Previous polls allowed for the pound to recover. GBP/USD was on the move to the upside but failed to reach 1.29.
What cannot go up, must go down. the YouGov poll already sent GBP/USD back down under 1.28. Support awaits at 1.2770, one of the post-elections announcement lows. If cable loses this level, further support awaits at 1.27, followed by 1.2615.
Pound/dollar is also on the verge of losing the initial post-Brexit range and falling back to the previous one.
More: GBP: No Point Of Speculating On Elections Outcome; Sell Rallies – ANZ
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