Polls show gap closing on Boris
The Pound has moved off its highs as the latest key opinion poll has shown the Conservative’s lead narrowing.
YouGov’s second MRP survey predicts that the Tories lead has moved down to 28 versus 68 two week ago. So, although it still looks like a healthy lead, the odds of a hung parliament have increased and therefore traders have become more cautious over Sterling.
Pre-election opinion polls have to be taken with a pinch of salt and they often (famously) miss the mark. So, the markets are gearing up for a volatile couple of days as this election is still not a done deal and the result will have such significance moving forward.
A Tory majority is widely expected to boost the Pound as it creates more certainty over Brexit and their policies are more market friendly. A Labour majority is very unlikely but if it occurred the Pound would be expected to tumble because of their perceived less market-friendly policies (e.g. nationalisation, tax/spending/borrowing hikes). A labour-led coalition (with SNP/Lib Dems) is also expected to weaken the Pound in the short-term but not as much as Labour’s policies would be watered down. In this scenario, it’s also likely that the Pound would later rebound as a second Brexit referendum would likely be called.
With voting set to start within less than 24-hrs, the market will take more interest in the real sentiment on ground tomorrow. It’s likely they’ll be some large swings as the exit polls come out and then as the results trickle in overnight (we expect most of the volatility to occur between 1am and 6am Friday). Traders will be particularly focused on some of the key swing seats and whether the Tories can break Labour’s ‘red wall’ (in the north and Midlands). Watch this space.