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UK Election Day
As the UK takes to the polls today to vote in the General Election, GBP remains well bid. A Labour Party win has been well telegraphed throughout the election campaign with polls showing Keir Starmer’s party in front with a comfortable +20% lead throughout. With the market widely expecting a Labour win today, confirmation should keep GBP supported near-term though the overall action is likely to be muted with little impact on the BOE’s outlook.
Limited Market Reaction
In terms of policy change, expectations are narrow given the limited conditions to be inherited by the new government such as public debt to GDP sitting at more than 60-year highs. Tax hikes and or increased borrowing will be the only routes available in order to avoid spending cuts, which might raise some questions around growth. In terms of a bigger market reaction, the outside scenario of the Conservative’s retaining power would be the main focus. Given the wide expectations for a Labour win, a shock result such as that would likely see GBP coming under heavy pressure.
BOE in Focus
Beyond the outcome of today’s vote, the bigger focus will remain on expected BOE easing in August. With inflation back at target, traders are firmly expecting the bank to begin cutting, with any further fall in inflation likely to bolster expectations of further easing over the remainder of the year. Only an upside inflation surprise ahead of the August BOE meeting is likely to unseat this view.
Technical Views
GBPUSD
The latest test of the 1.2612 support has seen the pair bouncing firmly higher, now testing the bear trend line once again. Above here, 1.2832 will be the next resistance level to note. Momentum studies are turning higher here, putting focus on further upside for now. To the downside, 1.2437 will be the next support should current lows break.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.