The UK General Election – The Odds, the Polls and the Pound

Bob Mason

The UK is back under the microscope this week as political parties kicked off their campaigns on Wednesday.

Boris Johnson dissolved Parliament on Wednesday and formerly received permission from the Queen as is the protocol in the UK.

With the general election campaigns up and running, the immediate race is between the Tories and the Labour party.

Brexiteer Boris Johnson and fence-sitter Jeremy Corbyn are looking to make it a 2 horse race.

While the purpose of the general election is to break the deadlock on Brexit that has all but crippled UK politics, there’s more to it this time around.

In the 3rd general election in four-and-a-half years, Boris Johnson will also look to take back Parliament with a majority.

While losing a series of Parliamentary votes since taking office, October votes showed that Johnson had managed to reunite a broken Conservative Party.

The unification of the Tory Party couldn’t have come at a better time for Johnson and the Party as a whole.

Bad news, however, continues to follow Boris Johnson and the Tories.

A possible case against Leave Britain for knowingly overspending during the 2016 EU Referendum campaign is one skeleton in the closet.

There is also the latest report of Boris Johnson covering up a report on Russia meddling in UK politics.

Throw in Rees-Mogg’s comments in reference to the Grenfell fire and it’s not the running start that Johnson would have wanted.

We can expect the news media to play a significant role in the general election. Expect it to get dirty as Johnson and Corbyn fight for the prize.

With the battle commencing, we can also expect the Pound to come under more scrutiny. That means plenty of volatility over the next 5-weeks assuming that the opinion polls narrow.

The UK Opinion Polls

According to data collected between 1st and 4th November, one opinion poll showed the Tories with a 7-point lead over the Opposition Party.

Following the local elections earlier in the year, expectations had been for the Liberal Democrats to push past the Labor Party.

The latest polls had the Liberal Democrats with 15% support, well below Labour’s 31% and the Conservative Party’s 38%. The Brexit Party had 9% support.

While Johnson still commands a solid lead, it was a whopping 17 point lead, according to last week’s opinion polls.

In spite of the clear divide between the three main parties, both the Tories and Labour lost voters to the Lib Dems and the Brexit Party.

This shift could well reverse, however, with those planning to vote for the Brexit Party capable of voting blue to deliver on Brexit.

According to those polled, 11% of those who voted for the Tories in 2017 shifted allegiance to the Brexit party.

The Labour Party saw 12% of their previous support cross over the Lib Dems. Corbyn may find it a little harder to woo back the 12% should he continue to sit on the Brexit fence.

While Brexit is certainly the main area of focus going into the election, there are other voter concerns.

According to Ipsos Mori’s last survey, healthcare and the NHS were also a major consideration for voters.

Ultimately, however, we can expect Britain’s membership with the EU to have the greatest influence on the electorate.

Hung Parliament

While the opinion polls have the Tories in a winning position, there’s also the risk of a hung parliament.

Last week, UK bookmakers had the Conservative Party odds on favorite to win with a majority. The odds of a hung parliament stood at 5/4…

For Jeremy Corbyn the bookies were certainly not favoring a Labor Party victory, giving odds of 20/1 to win. Lib Dems had odds of 80/1, with outsiders the Brexit Party at 200/1.

Going into the first day of campaigning the bookies and the polls were largely aligned.

It remains to be seen, however, whether either will deliver an accurate projection ahead of the main event.

For the Pound and the broader markets, the opinion polls will have the greatest influence.

The Pound

At the time of writing, the Pound was down by just 0.05% to $1.2875. For the week a 0.54% loss would seem modest when considering what lies ahead.

Based on recent moves, any narrowing in the opinion polls would likely test the Pound.

A hung parliament would likely lead to yet another extension and, best-case scenario, a 2nd Referendum.  Worst-case scenario, we could see another drawn-out sequence of renegotiated deals thrown out by lawmakers.

The positive, however, is that there are a limited number of members of Parliament supportive of a no-deal Brexit. The EU has also stated that no further negotiations are possible. Perhaps, however, they would be more amenable should the UK have yet another leader to deliberate in Brussels…

This article was originally posted on FX Empire

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