- EUR/GBP rallied some 0.55% on the release of the latest bellwether poll from YouGov showing a Tory party majority in decline.
- Labour gained 21 seats while Conservatives are below the troublesome 340, with just 339 seats /43% vote share.
- The Conservative party has a majority of just 28.
- A hung parliament could see a sour outcome for sterling and lif EUR/GBP into a 0.86-0.88 range.
The latest YouGov MRP model has seen the Conservative lead over Labour falling over the past week, taking the model from almost 12pts on 4 Dec to about 9pts today. The results have weighed heavily on the pound today which has now morphed into a consolidation across the board ahead of European and North America market opens, albeit with immediate attention on the Federal Reserve interest rate decision and the European Central Bank’s, Christine Lagarde’s first at the helm on Thursday.
The UK election results will start to come in on Friday morning, around 0200 GMT. The base-case still favours a Tory victory, and in such a scenario, momentum and euphoria can probably take Sterling to even higher levels than we have witnessed in speculative long positions building up over recent days. Indeed, there is unlikely to be an liquidity from current levels down to the prior swing lows of 0.8392.
However, while the YouGov is the most trusted of the polls, the favouritism towards the Labour party could be far greater than what has been shown today and thus we could well end up in the situation with a very hung parliament. The risk here is nothing will be passed and the UK would have to go back and ask the EU for yet another extension before another span election is called. In such a scenario, the pound will be expected to take a beating as markets go back to the drawing board on Brexit. Consequently, the bulls could target a range of 0.86/0.88 in the first instance as being between a 23.6% Fibonacci retracement of the summer highs/recent lows and the 200-day moving average’s confluence of the 23rd Sep swing/upside corrective lows.
The latest YouGov results
UK Election: YouGov/Times MRP Model projects Conservative majority of 28 (Nov. 27: Majority Of 68)Con 339 (-20).
- Lab 231 (+20).
- Lib Dem 15 (+2).
- SNP 41 (-2).
- Plaid 4 (0).
- Green 1 (0).
- Other 1 (0).
Key event previews ahead of UK elections
- Federal Reserve Interest Rate Decision December 10-11 Preview: Watching for the Projection Materials
- US Consumer Price Index November Preview: Inflation nostalgia
- ECB: continuity and readiness for the next decade – ANZ Bank:
- Christine Lagarde has inherited negative interest rates, a swollen ECB balance sheet and a tone of disunity over the most recent policy initiatives.
- Breaking the downward shift in inflation expectations and encouraging a better policy mix in the euro area will be the main challenges under her leadership.
- We expect this week’s policy meeting will begin the process of building on Draghi’s achievements and ensuring his necessary policy prescription is temporary, as intended.
EUR/GBP levels
Share
