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UK general election 2017

Theresa May has called for a snap election to take place on 8 June. What does this mean for the markets? Take your position with IG.

Why trade the election with IG?

  • Trade on the market reaction

    Trade CFDs on over 15,000 markets, including AUD/USD and the FTSE 100.

  • Go short or long

    Think a bear market's on the horizon? Take a short position.

  • Political digital 100s

    Trade the results of key elections and referendums.

How to trade the election with IG

With over 15,000 markets available, you can trade CFDs on:

  • FX pairs, including GBP/USD and GBP/EUR
  • Indices, including the FTSE 100 and FTSE 250
  • Commodities, including gold

Markets to watch

Despite concerns that a post-announcement uptick was a one-off, sterling’s rise currently shows no signs of letting up. Given that Conservatives are expected to add to their seats, will GBP/USD continue to make gains over the next few weeks? 

Of course, some nerves are still likely to emerge nearer the date of the election itself. So while a Conservative majority may be seen as a gimme, there may still be some volatility around major sterling pairs as we approach election day. Should May secure her position, she’ll enter Brexit talks on much more stable footing. 

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Prices above are subject to our website terms and conditions. Prices are indicative only.

This may provide some much-needed encouragement to the pound just as the uncertainty of the next two years is again brought front and centre. Keep in mind, however, that all it takes is one misstep during negotiations for confidence in sterling to plummet once more.

The FTSE 100’s progress may be checked for the next few weeks as it feels the impact of the stronger pound, though over the longer-term it’s unlikely to prove a major concern. But the future of the FTSE 250 is less certain: for all the pro-business policy currently giving the mid-cap index a boost, this could be completely upended when EU leaders lay out their conditions.

How have markets reacted so far?

In the immediate aftermath of May’s surprise announcement, the pound surged to its highest level of 2017.
It wasn’t immediately clear if this boost would be a sign of things to come, or if sterling short-sellers were simply beating a hasty retreat. However, a wider sense of optimism did indeed take hold, and the pound continued to rise. Confidence among those who have stood by their short positions, on the other hand, continued to dwindle, adding to the pound’s upward momentum.

A rising pound had its own impact on the FTSE 100, whose constituents have benefitted from cheaper exports over the last few months. There were certain catalysts at play – the global index was already on the back foot with an iron ore oversupply hitting miners – but resurgence in sterling was a key reason behind the FTSE 100’s worst fall since the EU referendum.

Meanwhile, the FTSE 250 shook off early jitters and went on to reach an all-time high after May’s announcement. The mid-cap index is seen as particularly vulnerable to Brexit negotiations, yet clearly the prospect of Conservative-driven business-friendly policies is, at least for now, putting those concerns to bed.

In the immediate aftermath of May’s surprise announcement, the pound surged to its highest level of 2017.
It wasn’t immediately clear if this boost would be a sign of things to come, or if sterling short-sellers were simply beating a hasty retreat. However, a wider sense of optimism did indeed take hold, and the pound continued to rise. Confidence among those who have stood by their short positions, on the other hand, continued to dwindle, adding to the pound’s upward momentum.

A rising pound had its own impact on the FTSE 100, whose constituents have benefitted from cheaper exports over the last few months. There were certain catalysts at play – the global index was already on the back foot with an iron ore oversupply hitting miners – but resurgence in sterling was a key reason behind the FTSE 100’s worst fall since the EU referendum.

Meanwhile, the FTSE 250 shook off early jitters and went on to reach an all-time high after May’s announcement. The mid-cap index is seen as particularly vulnerable to Brexit negotiations, yet clearly the prospect of Conservative-driven business-friendly policies is, at least for now, putting those concerns to bed.

FAQs

When is the general election?

Prime Minister Theresa May has announced a snap election to be held on 8 June 2017.

Who are the key candidates?

Theresa May – Conservatives

Jeremy Corbyn – Labour

Tim Farron – Liberal Democrats

Paul Nuttall – UKIP

When was the next election supposed to be held?

The next election in the fixed-term cycle was due to take place in March 2020.

Despite promises that an early vote wasn’t on the cards, clearly the prospect of another general election became all too tempting for May, whose party has been leading significantly in the polls for some time.

What is a snap election?

A snap election is an election called early, ahead of the next fixed-term election.

It is generally initiated by the incumbent party, but must gain approval from the rest of parliament in a vote. Theresa May’s proposed snap election was approved in Westminster by 522 votes to 13. 

Why call a snap election?

The snap election gives the Conservatives a chance to consolidate its current strong position and improve upon its slim, 17-seat majority. Expanding this margin could prove critical in passing Brexit-focused legislation further down the line.

The election could also act to cement Theresa May’s hard-line Brexit tactics. In the face of her domestic opponents, success may provide May with something tangible she can use to justify her agenda. In the face of her EU adversaries, it lends weight to her assertion that hers are simply an extension of wider British interests.

Nicola Sturgeon’s recent call for a Scottish independence referendum in autumn 2018 is also likely to have been a motivating factor. Current polls put support for independence at its lowest since the referendum, and May could be looking to capitalise on this, giving disenfranchised Scottish voters a chance to move away from the SNP. 

Why do elections create volatility?

As with any event whose outcome is an unknown, elections encourage speculation among traders. The less certain a result is, the more volatility you’re likely to see.

This election in particular is seen as a key influence for the financial markets, because it will either cement or upend the direction of the impending Brexit negotiations. So while the Conservatives are expected to gain a mandate, recent political upsets may give the markets cause for added volatility ahead of the result.

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