Two-week high for cable as Conservatives extend election poll lead
GBP/USD has climbed 0.6% higher to break above $1.2985 today after a series of weekend election polls show that the Conservative Party has extended its lead over Labour.
Markets have moved to price in higher odds of a Conservative Party victory at the upcoming December General Election on the back of the latest polling data.
Data released over the weekend shows the Tories leading Labour by 15%-17%. A poll released this morning by Survation put the Conservatives at 42% and Labour at 28% – a 14-point lead.
Brexit party threat diminishes
Markets are also relieved to see that Nigel Farage’s Brexit Party is polling at just 5%. Even though Farage announced that Brexit party candidates would not stand in the 317 seats won by Conservative MPs during the 2017 election, there were still concerns that, by challenging Labour, the party would split the Brexit vote.
This risked diluting Tory support and potentially granting victory to Labour or Liberal Democrat candidates in hotly contested areas.
With support for the Brexit Party so low, markets are now betting that Boris Johnson will win enough support to form a majority government. Any Brexit Party candidates in Parliament would likely have advocated for a harder Brexit than the one outlined in Boris’s Withdrawal Agreement. In sufficient numbers, they could also have attracted the support of Tory rebels and pressed for more talks, or even a no deal exit.
UK on track for January 31st Brexit?
A solid majority for Boris Johnson means that it is likely the Prime Minister will be able to pass his Withdrawal Agreement bill by the new Brexit deadline of January 31st. This would finally put an end to the uncertainty that has gripped the UK economy for over three years and will allow politicians to focus once more on the domestic agenda.
Cable has twice tested and rejected the $1.30 handle in the past few weeks. There are still 24 days until the election, which is plenty of time as far as politics is concerned for everything to change. This, combined with the memory of the referendum and the 2017 election, could mean it takes more than just a few polls to fuel a rally above $1.30 ahead of December 12th.