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General election déjà vu

5th November 2019


December 12th could produce a general election like no other. Unlike previous elections, we are seeing a serious challenge to the traditional two-party system: Conservative and Labour. The recent European election provided a glimpse of a potential changing of the political guard, following the resurgence of the Liberal Democrats and the emergence of the Brexit Party.

There are so many questions that need answering in the next few weeks: will the election be driven by Brexit or domestic policy? Does the electorate have Brexit fatigue and subsequently want action on schools, the NHS and policing? One thing that’s certain during an election, however, is no matter how much time and money they spend on campaigning, the politicians are powerless; it’s the electorate that dictates where the battle is fought.

While we have seen the nation frustrated by the Brexit merry-go-round for over three years now, we can’t ignore the reason for the British public having to cast their vote on 12th December:  Brexit-related politics.

As it stands, political parties have been nailing their colours to various masts regarding their Brexit stance:

  • Conservatives – get Brexit done
  • Labour – offer a second referendum
  • Liberal Democrats – cancel Brexit
  • Brexit Party – deliver a “no deal” Brexit
  • SNP – Scottish Independence Vote and remain

If a large part of the election battle is to be fought over Brexit, both sterling buyers and sellers will be watching with bated breath to see how the currency reacts to numerous scenarios.

Strangely, there is a common belief that suggests if either the Conservatives, Labour or Liberal Democrats win a majority, sterling will strengthen based on each parties Brexit promise.

  • Get Brexit done – A Conservative majority is likely to ensure the deal between the UK and EU is finally passed. With the deadlock broken, UK businesses will be provided with some much-needed clarity moving forward.
  • Second Referendum – A Labour majority is likely to result in the UK remaining in the EU following a second referendum, with business carrying on as normal. According to the Politico’s Poll of Polls UK - Hypothetical second Brexit referendum the result would look something like this: Remain 50%, Leave 44%, Undecided 4%, No Ans 2%.
  • Cancel Brexit – A Liberal Democrats majority will result in cancelling Brexit and therefore business carries on as normal.

At the time of writing, the shortest odds available for an overall majority (according to Betfair) were:

  • Conservative Majority = 5/6
  • No Overall Majority = Evens


This blog is being written before Parliament has been shut down or "dissolved" on 6th November, so to say its early days in the election campaign period is in an understatement. Despite the odds favouring the Conservatives, we should cast our minds back to the last time a PM called a general election: back in 2017 Theresa May’s objective was to increase her majority to ensure “Brexit means Brexit” – sound familiar? At the time, Mrs May was more popular than David Beckham, according to a poll by The Independent newspaper. While Boris Johnson is apparently the most popular Conservative politician in the UK at present, according to a survey by YouGov – but will he be reading too much into it given his predecessors fall from grace?

Prior to the 2017 election, the Ipsos Mori poll predicted that the Conservatives had 49 per cent of public support, compared to Labour with just 26 per cent; a much greater lead than Mr Johnson currently holds over Mr Corbyn. When the votes were finally counted however, the Conservative majority had been narrowed significantly, rather than widened as planned; forcing them to form a confidence and supply agreement with the Democratic Unionist Party (DUP).

So, what might this all mean for sterling in the following six weeks. It is hard to see the currency being bought significantly, due to the underlying risk of no majority in parliament. By the same logic, it’s hard to see it dropping off drastically while Mr Johnson’s Conservatives hold the edge in the polls. If this starts to change, however, then sterling will react accordingly.

Opinion polls will inevitably play their part, but there is a degree of scepticism surrounding the way this data is captured given their track record: the EU referendum, President Trump and the 2017 election being prime examples. Based on this, based on history, sterling could well remain range bound, which could provide importers and exporters with opportunities during this six-week period. How big that range is can’t be determined at present. What’s more, given the historic erratic nature of Brexit and the UK electorate, nothing is off the table; including a “no deal”.

We will provide a further update once election campaigning is in full swing. In the meantime, however, if you have any questions surrounding the state of play, require a live execution price or need additional information regarding a hedging strategy to reduce currency volatility, please contact us via email or directly on 020 3384 7280.

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