Markets prepare for Conservative win as polls play key role
Markets are preparing for a Conservative majority. However, while volatility seems a given, the results remains far from it.
GBP/USD: how the markets respond
Markets appear to be preparing for a Conservative majority, with the pound continuing to rise across the board as we enter the final stretch. As GBP/USD hits a seven-month high, there is a clear linkage between the pound and the polls. While we are seeing fluctuations from poll to poll, the general consensus appears to be that there is around a 10-basis-point gap between the Conservative and Labour parties, with the recent tightening between the two main parties abating to the relief of sterling bulls.
However, major question marks remain over the validity of these polls, with this election promising to be the most difficult to predict as traditional Labour seats shift towards the Conservatives. Huge questions remain over the size of such a shift, and to what extent tactical voting can reverse those gains back in favour of a Liberal-Labour coalition. One thing is for sure, there is likely to be huge volatility ahead for the pound, with options markets pricing in a 250-point move in GBP/USD over the course of the week.
UK stocks outlook
On the equity front, we have seen outperformance for domestically sensitive sectors such as UK banks and the housebuilders, which are likely to continue tracking the trajectory of the pound more than the FTSE 100. FTSE traders will be wary for the week ahead, with the 2016 referendum highlighting that initial GBP-FTSE synchronisation is typically short-lived as any strong sterling move is reflected in an inverse move for the FTSE 100.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
Trade on the general election result
- Go long or short with CFDs or spread bets
- 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
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.