Despite the fridge-like conditions, polling booths around the country opened their doors at 7am this morning and will close again at 10pm. The currency markets are bracing themselves for another roller coaster, to add to what has already been a tumultuous year. The media are prohibited from reporting and will fill air-time with reports of dogs in polling booths etc. Our phones will be ringing off the hook today, so we are open until 11pm tonight, and will reopen at 7am tomorrow morning.
When will we know? As soon as the polling booths close, Ipsos Mori will release an exit poll conducted for the BBC, ITV News and Sky News; the first indication and will trigger an avalanche on financial markets. Then it’s a race between Sunderland and Newcastle to release the first results, and nearly all will be done by 6am. The majority mark stands at 326, although 314 might be all the Tories need with DUP support.
A Conservative majority: The consensus amongst analysts is that this will mean Pound strengthens. In fact, Sterling has priced in nearly all of that possibility after polls indicated a clear lead, gaining 2% on the Dollar in the last fortnight (buy the rumour). There’s likely to be a kick higher throughout the night in that case. There is a strong possibility that Sterling could suffer a big "sell the fact" pullback. After the dust settles we could be circa 1.2800s on the Dollar and 1.1500s on the Euro. If the prospect of a hard brexit returns on the agenda for 2020 the fallout could be vicious with a drop of 10-15%, potentially worse than we’ve seen before. USD at 1.1500-1.1800 and the Euro dropping below parity.
Hung Parliament: Depends who’s in the driving seat and what comes next...The initial outcome looks similar in that the Pound would drop near 1.2750 on the Dollar and 1.1450 on the Euro. The only real excitement would be if Labour were in charge but a coalition partner could stymie Labour’s manifesto spending plans the Pound could strengthen by 10-15% across the board.
A Labour majority: The general consensus is that the Pound will plummet by 10%+ in the short term.
Green Party majority: The price of bacon will soar .
So the spectre of Brexit remains for whoever wins the election, and although impeachment might provide fleeting distraction, it’s Brexit all the way until the US Election in November.
Posted in Daily Market News on Dec 12 2019