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The week ahead
There are plenty of reasons for us to be doubtful of political polling ahead of the UK December 12th election.
The Brexit issue has been exhaustive but are we sailing closer to a clean break ahead of the January 31 Brexit deadline?
In GBP/Brexit news, political jostling supported the GBP in a sharp move higher to start this week.
The Brexit party boosted the optimism around Brexit by way of a clearer pathway to a majority UK government post December 12 election – lifting GBP sharply.
There is a clear absence of UK data on the calendar this week, but the Brexit news/headlines should be enough to create bullish momentum.
We have seen optimism surrounding Brexit come & fade on numerous occasions during the recent negotiations, but this time could hold more strength and cause a continuation.
Weekend polls continuing to move in favour of the Conservative party has seen the Pound open on a firmer footing to begin the week. According to the latest Politco poll of polls the Conservative party is average 41% (2ppts shy of its peak in the run up to the 2017 election), while the Labour party are at 29%. Consequently, a Conservative majority is becoming increasingly likely with bookmakers pricing in such an outcome at 63%. However, while GBP/USD has pushed higher, 1.3000 remains the stumbling block for the pair and thus gains are somewhat limit in the run up to the election.
Sterling has opened the week on a positive footing after weekend General Election polls showing UK PM Boris Johnson comfortably ahead of Labour’s Jeremy Corbyn. Four polls showed Boris Johnson winning a majority on December 12, with YouGov giving the Tories a 17 point lead, Opinium a 16 point lead, Deltapoll a 15 point lead, while SevantaComRes put the Conservatives eight points ahead. Bookmakers have also cut their odds on a Conservative majority to around 4/9, with no overall majority at 6/4 while a Labour majority is offered at 25/1. With nearly a month to go before the General Election, polls can, and will, move either way, the current lead for the Conservatives will have alarm bells ringing at Labour’s headquarters.
Sterling continues to price in the good news with GBPUSD nearing 1.3000 and looking to test highs last seen in early May. There are a handful of recent highs topping out at 1.3013 that need to be broken and closed above before the pair look at the May3 high at 1.3177. The pair also got a technical boost last Monday with the formation of a golden cross – when the 50-day ma moves higher through the 200-dma – a bullish chart set-up. GBP/USD has moved nearly two big figures higher since last Monday. The CCI indicator does warn that GBPUSD is becoming overbought.