Jane Foley, senior FX strategist at Rabobank suggests that GBP has found support on the prediction that the Tory party may have enough support to form a majority government and is likely to continue to react positively to any news that suggests the PM Johnson’s hand is set to be strengthened.
Key Quotes
“A Tory majority, however, could still prove to be a Trojan horse for the pound.”
“For GBP, any news that appears to increase the likelihood of a Tory majority is seen to be a positive factor. This may be in part due to the historic perception that a Tory government implies prudent budgetary management, but it is more likely related to PM Johnson’s Withdrawal Agreement. Insofar as the PM has a deal with the EU, it would appear that a post-election Tory majority would finally ‘get Brexit done’. What this logic does not take into consideration, however, is that the trade negotiations still have to be tackled. If these are unsuccessful the UK may still face a disorderly Brexit at the end of the transition period in just over a year’s time.”
“Since the Tory party has shed itself of many of its moderate MPs, there may be a greater risk that differences between a Johnson government and the EU will appear during the trade talks. In particular the EU has warned the UK against rolling back on regulation.”
“Already differences could be appearing on workers’ rights and possibly on tax. If trade talks do not go well the risks of a no deal Brexit would again rise since a Tory majority with several Brexiteers in the cabinet could be disposed to this outcome. A Tory majority may therefore bring plenty of scope for GBP volatility next year.”
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. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to daily gains above 1.0650
EUR/USD gained traction and turned positive on the day above 1.0650. The improvement seen in risk mood following the earlier flight to safety weighs on the US Dollar ahead of the weekend and helps the pair push higher.
GBP/USD recovers toward 1.2450 after UK Retail Sales data
GBP/USD reversed its direction and advanced to the 1.2450 area after touching a fresh multi-month low below 1.2400 in the Asian session. The positive shift seen in risk mood on easing fears over a deepening Iran-Israel conflict supports the pair.
Gold holds steady at around $2,380 following earlier spike
Gold stabilized near $2,380 after spiking above $2,400 with the immediate reaction to reports of Israel striking Iran. Meanwhile, the pullback seen in the US Treasury bond yields helps XAU/USD hold its ground.
Bitcoin Weekly Forecast: BTC post-halving rally could be partially priced in Premium
Bitcoin price shows no signs of directional bias while it holds above $60,000. The fourth BTC halving is partially priced in, according to Deutsche Bank’s research.
Week ahead – US GDP and BoJ decision on top of next week’s agenda
US GDP, core PCE and PMIs the next tests for the Dollar. Investors await BoJ for guidance about next rate hike. EU and UK PMIs, as well as Australian CPIs also on tap.