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Jane Foley, senior FX strategist at Rabobank, suggests that tactical voting have become watch-words in the current UK election campaign as in some areas the Liberal Dems, Greens and Plaid Cymru have agreed not to stand candidates in order to avoid splitting the ‘Remain’ vote.

Key Quotes

“Nigel Farage has agreed not to stand Brexit Party candidates in Tory seats and voters are being offered an array of advice on how to use their vote wisely in the context of ‘Leave’ or ‘Remain’. As ever, the parties themselves are also carefully considering their tactics. Insofar as opinion polls are suggesting that the Tories now have a tidy lead over the Labour party, it would appear that PM Boris Johnson is having the most success.”

“The latest Survation poll suggests that the Conservative party is leading on 41% with the Labour Party at just 30%. Given the UK’s first part the post system, this does not translate directly into parliamentary seats. However, some polls are suggesting that PM Johnson may have sufficient support to form a majority government.”

“Political uncertainty has weighed heavily on investment confidence for the past couple of years. So, since a Tory majority this would allow Johnson to pass the EU withdrawal agreement in time for a January 31 Brexit, this factor has helped support to pound over the past few weeks. That said, with just 2 ½ weeks to go before Britons cast their votes, there are still plenty of risks for the Tory party.”

“If PM Johnson’s Conservatives win a majority on December 12 we see scope for GBP/USD to head towards 1.32 on the expectation that political uncertainty will be reduced. However, given risk that the trade talks with the EU will not be as easy as Johnson has indicated, we see plenty of scope for disappointment in 2020. Since this election is likely to see many moderate Tory MPs replaced by Brexiteers, the threat of a no deal Brexit at the end of 2020 may return. Additionally, headwinds to UK growth are also a threat for GBP next year.”