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UK General Election 2017 – GBPUSD

Market Analysis
2017-06-08_10-21-14

GBPUSD, Daily                 

The latest set of opinion polls before today’s UK General Election suggests a Conservative party majority of 50+ seats, however as with last year’s EU Referendum result and the surprise in the USA Presidential Election, nothing can be taken for granted.

The UK Prime Minister called the Election on April 18, cable closed the day at 1.2838 and has held that support ever since in anticipation of a Tory victory. As the opinion polls showed a lead for Mrs May extending to over 20% the cable rate peaked at 1.3050,  a poorly received manifesto and a  political U-turn saw the lead shrink to 5-6% over the last three weeks. Cable spiked down to 1.2770 at the end of May before recovering to 1.2900 yesterday, and rallied to 1.2970 overnight on the final opinion poll news.

My own view is that cable will rally to the fractal high at 1.3085 on a strong result for Mrs May and possibly as high as 1.3200 following a dovish Fed announcement next week (June 14).  1.3000 remains a major psychological pivot point. Initial support is at the April 18 high at 1.2838 and then the recent Fractal lows at 1.2740.

A Hung Parliament, where no party is in overall control, is in my view the worst case scenario and cable could fall to under 1.2350 in all the uncertainty. However, with the anticipation of a perhaps more consensual approach, particularly to the REAL issue which is BREXIT, cable could also recover quickly.

A Labour party win with a working majority is not priced in and would be a major shock. Cable would likely fall (1.2400) but perhaps less than in the confusion of a hung parliament and recover in a similar vein but over a longer time frame as the impact of higher taxation and government spending filter through.

All will be clear shortly after the polls close at 21:00 GMT as the various UK and international broadcasters publish their historically rather reliable, exit polls.  An official result will be available by around 06:00 GMT.

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Stuart Cowell

Senior Market Analyst

HotForex

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