What’s driving the GBP today?
|All about the December 12 election
The GBP is being moved around on the upcoming UK general election due to take place on December 12. The GBP is being bought on the anticipation of a Conservative victory. The reason this is good news for the GBP is that a Conservative majority means that Prime Minister’s Boris Johnson Brexit Withdrawal Agreement Bill (WAB) Is much more likely to be voted through. A Conservative majority will in fact, pretty much guarantee it passes through the House of Parliament and is enacted into British Law. Take a look at the chart below for a snapshot of the latest polls.
The potential for a buy the rumour sell the fact trade
A Conservative victory is being priced into the GBP and there is a potential for a ‘buy the rumour’ sell the fact type of trade setting up on the GBP. GBPUSD is up above 1.31000 and making its way up to key weekly resistance at the 200EMA around 1.3350. If the conservatives do win a majority it is quite possible that the GBPUSD pair spikes up and then sells off in the immediate aftermath of a Conservative election.
What happens to the GBP after the UK election?
Let’s, for the sake of argument, assume that the Conservative party do win the election. What then for the GBP in the medium term? ( we may well see a buy-the rumour- sell the fact response in the short term). Well, from there I am expecting further uncertainty around the ongoing relationship between Britain and the EU. Furthermore, the institute for Fiscal studies said that neither the Conservatives or Labour parties have a credible fiscal plan. The Institute warn that higher taxes are ahead than either party has indicated. Therefore, there very well may be more downside in the GBPUSD for the medium term.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.