EUR/GBP will be a key focus into UK elections, bears seeking a 1% drop
|- The UK's electorate vote at this week's general election putting pound under the spotlight.
- A hung parliament would take EUR/GBP towards 0.86-0.88 range.
- Base case is for a Tory victory and a Brexit deal to support GBP.
EUR/GBP will be a major theme for the weeks ahead as the UK's electorate make their say at this week's general election, from which a vote for the Conservative's will likely finalise a Brexit deal with the EU. At the time of writing, EUR/GBP is trading at 0.8412 having regained ground from the day's low of 0.8392. The session high has ben 0.8426, in line with the 50 1-hour moving average's resistance.
All eyes on UK elections
While there will be a number of events, such as UK manufacturing and UK Industrial Production, the European Central Bank and the Federal Reserve, there will be major focus on the UK elections instead where a drop in EUR/GBP is presumed on a base case scenario that he Tories get to vote on the withdrawal bill following PM Boris Jhonson's victory and before Christmas - thus getting a deal over the line with the EU which is a bullish scenario for both UK politics and the pound.
"We would assume a drop to the tune of 0.5-1.0 percent in EUR/GBP under the base case, thus settling in at the high end of 0.83-0.84 in the days after the election," analysts at Danske Bank argued.
Meanwhile, the analysts also noted that under the alternative scenario of a hung parliament, they believe the market would sour and take EUR/GBP towards 0.86-0.88 range. Anything fewer than 340 seats (out of 650) would point to continued instability in 2020 as party hard-liners pull the government in opposite directions. Fewer than 312 Conservative seats risk a Labour-led government – see here for a UK election preview.
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.