Pound gains after poll suggests Tory majority

Summary:

• Widely followed poll projects 68 seat Conservative majority

• GBPJPY and EURGBP both at interesting levels

• Stocks pullback a little as Trump signs HK bill

After a solid day of gains for sterling there were further gains late last night, when the release of an eagerly anticipated election poll pointed to a sizable majority for the Conservatives.

GBPJPY has moved clearly up above the 61.8% fib at 140.87 with a strong day’s trade yesterday. The 78.6% fib is at 144.75 - just over 300 pips away - and a possible target for longs if this breakout takes hold. Source: xStation

While there are many opinion polls released on the election, the MRP release garnered the most attention due to the results being broken down into individual seats rather than a simple popular opinion. The results of the YouGov/Times MRP poll was as follows, shown in the format of seats (change):

• Conservatives: 359 (+42)

• Labour: 211 (-51)

• Lib Dem: 13 (+1)

• SNP: 43 (+8)

• Plaid: 4 (-)

• Green: 1 (-)

• Speaker 1 (-)

EURGBP falls to 7-month low

This would give the Conservatives a majority of 68, with the bulk of the gains coming at the expense of the main opposition party, Labour. There are obvious caveats which should be mentioned with this result, such as that it was conducted before the recent slight narrowing of the Tory lead in other polls and that 30 of the Conservative seats are predicted have a winning margin of less than 5%. However, it’s quite clear that they are in a commanding position at present and it would take a fairly dramatic swing to see them fail to pick-up a majority. The relative reduction in uncertainty under a Conservative government is seen as greater than that under other possible outcomes and therefore this latest development has seen further gains in sterling, with the pound moving up to its highest level against the Euro in just under 7 months in response.  

The EURGBP pair has been grinding lower for several weeks now and is now approaching the lowest levels of the year around 0.8472 - driven mainly by an appreciation in the pound after a widely followed election poll pointed to a sizable Conservative majority. Source: xStation

Stocks dip as Trump signs HK bill

There was a little hit to risk sentiment overnight as Donald Trump finally signed the Hong Kong bill which features sanctions against officials deemed responsible for human rights abuses. Given the precarious nature of US-Chinese relations at the moment and a widespread hope amongst investors that a phase one trade deal will be signed shortly, this move has caused a little concern with equities pulling back after recent and bond yields falling. With the US celebrating Thanksgiving stock markets in New York are closed for the day and there’s a good chance we get a fairly slow day’s trade in other asset classes as many traders take the day off.