UK elections: Big risks for a small gain – TDS

Analysts at TDS explain that the UK votes for a new government on Thursday and when the election was called on 18 April, the Conservative Party was solidly polling in the lead, but Labour support has steadily gained during the campaign.

Key Quotes

“We see a 2/3 chance of a Conservative majority government, but we can’t completely discount a Conservative or Labour minority government.”

“We provide a timeline for key constituencies to watch on election night. If the 10pm exit poll provides a sign of a strong Tory showing, GBP should reprice strongly right away, leaving limited volatility through the overnight. But anything suggesting a close race would see GBP lose some immediately, with 5-6 key races out by 3am BST, with larger direction waiting till around 4am or later.”

“GBP will benefit most from a clear victor, although a strong Conservative majority offers the greatest potential to see EURGBP downside. An unexpected Labour win would have us look to fade a likely spike higher while a more ambiguous outcome suggests a high degree of intraday volatility. Here, the price sequence of results will be key in guiding the FX market response.”

“While we see almost twice as much downside as upside for gilt yield reactions on the open on Friday, the upside to rates remains small while any significant downside should likely be faded.”