UK: What a Conservative landslide might imply for the broader economy? - Nomura
|The analysis team at Nomura points out that UK opinion polling suggests a large majority for Mrs May’s Conservative Party is possible which is likely to have a number of economic implications based on last week’s manifesto.
Key Quotes
“The Conservative party under Mrs May has shifted leftwards in its political stance, a move that the median voter theorem would suggest is reasonable in light of Labour’s leftward move under its current leadership. Opinion polling suggests a large majority for Mrs May’s Conservative Party is possible, notwithstanding polling uncertainty and recent falls in the lead, which would have a number of economic implications based on last week’s manifesto: a tough Brexit negotiating line, with the possibility of no deal at all, a high bar for a second Scottish independence referendum, a prolonged period (mid2020s) before the budget deficit is eradicated, the risk of a rise in income tax/national insurance contributions, capped household energy bills (though with potentially a limited/zero impact on recorded inflation), an increased chance of the next MPC members being female (which helps cut the number of candidates in the frame for anyone trying to second guess who will be appointed), the end of fixed-term parliaments, the state pension depending more on the outlook for wages than in the past, and increased housebuilding having less of an impact on prices than moves in incomes, interest rates and inbound capital.”
“As for the Gilt market impact, pension regulation could suggest near-term curve flattening but there is a long-term steepening bias. In terms of FX, we remain long GBP with “Brexit bill” flashpoints providing potential entry points to the trade.”
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.