Peter A Rosenstreich
Swissquote Bank Ltd
Noise around the UK local council elections highlights the fact that in today's lightning-fast media cycle not every election matters equally. Pundits are trying to make the case that a wide victory by PM Theresa May's Conservative Party suggests a sweeping victory in the General Election on June 8. But we suspect that this latest vote is more focused on local issues and less about Brexit. Making an extrapolation to broader voter sentiment is difficult, especially given a low turnout.
Yet in the short-term, why not trade in the sentiment. A solid showing by the Conservatives should equal a chance of a significant majority in the national vote next month. Should May receive such an electoral mandate, this should empower the UK's position heading into UK-EU Brexit negotiations. We would fade the hype and continue to believe the current harsh rhetoric (£100bn divorce bill) does not represent the probable end result.
UK fundamentals remain solid as composite PMI data suggests strong 2Q growth momentum (April rose to 56.2 from 54.8 above 54.5 expected) but we recognise that PMI did over predict 1Q growth performance. Predictions of a seizing up in consumption behavior by households and/or businesses have not occurred. Finally, devaluation of GBP continues to deliver dividends for exporters and manufacturing. We therefore remain bullish on GBP especially against the EU and JPY.
This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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