GBP/USD surges, Brexit Party won’t contest Tory seats
Brexit champion Neil Farage boosts chance of Tory election victory by not challenging Tory seats. UK GDP data weak but recession avoided.
Cable shot higher in London trading after Brexit Party leader Neil Farage announced his party would not challenge Conservative Party seats in the upcoming December UK elections, thus substantially increasing the possibility that Prime Minister Boris Johnson can form a solid majority government.
UK third quarter economic data came in at 0.3 last quarter, as expected. Second quarter GDP was negative, so the UK has managed to avoid a recession but annual growth is running at just 1%, the slowest in almost a decade.
GBP/USD surged almost 1% on the Farage news, nearly hitting the $1.29 level before pulling back to around $1.2875.
UK monetary policy on hold during election
Bank of England (BoE) policy makers are unable to signal their reaction to the latest GDP data while the election campaign is ongoing. It is a tradition that BoE remain quiet during elections to avoid perceptions of bias.
Thus not only will there be no decision on any interest rate moves, but the BoE is unable to signal its intent through any public statements nor will any officials be giving speeches during the period.
It is unlikely that the BoE will move to adjust interest rates until January, but analysts say that Brexit developments will be in the fore when it comes to influencing cable, with economic and policy information taking a back seat.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
Please see important Research Disclaimer.
Trade on the general election result
- Go long or short with CFDs
- Speculate on key markets – including British indices, shares and GBP forex pairs
- Manage your risk with our range of stops and limits
Live prices on most popular markets
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.