Eye on Britain – Election Looms

Britain goes to the polls in less than 10 days, on 8th June, to select a new government in a General Election.

The election was called early by the Conservative Prime Minister May, who took over following former Prime Minister Cameron’s resignation after his defeat in the Brexit referendum last year. It is obvious that PM May called the election for three real reasons: to secure her “own mandate” from the people, to dramatically increase her Parliamentary majority (as forecast by opinion polling) from its current narrow status, and to remove a looming election from the Brexit negotiations which much be concluded by the time of Britain’s legal exit from the European Union in 2019Theresa_May

The Conservatives have been in power since 2010, in coalition with the Liberal Democrats for the first five years, and then with a narrow majority since their victory in the election of 2015. It is often overlooked that the Conservatives were never able to win a majority in any election between 1992 and 2015, a far cry from the party’s 1980s heyday. The Labour Party had begun to look very vulnerable, after its leadership was taken over by the far left of the Party in 2015, and the Party plummeted in opinion polls. However, although British opinion polling has been notoriously inaccurate for years, polls in recent days have begun to show a sharp narrowing in the Conservatives’ poll lead, after initially indicating an historically very large election victory would be achieved, which helped push the Pound/Dollar above the psychologically crucial 1.3000 level for a while.

My own gut feeling is that Conservatives will win easily with a large Parliamentary majority, and that this will cause the GBP/USD currency pair to rise beyond 1.3000. If I am wrong and the outcome is one where Labour may be able to take power, expect the British Pound to plummet dramatically against all currencies: a fall of 10% or more as soon as the result looks clear would be quite possible. Political bookies place the odds of the latter outcome at only 8%, whereas a bet on a Conservative victory only pays a return of 8%: this gives a good idea of how heavily the odds still favor the Conservative Party.

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