GBP remarkably stable amidst political chaos – TDS

As the results of UK elections have come rolling in, sterling has been remarkably stable, with GBPUSD holding in around 1.2750 so far, as there seem to be too many open questions to provide markets with much direction one way or the other explains the analysis team at TDS.

Key Quotes

“There are a lot of questions now about May’s leadership, and whether she’ll be able to hold onto her position as leader of the party and PM. With Brexit talks scheduled to begin later this month, a leadership contest (assuming that two or more candidates end up running) would take about three months, likely pushing back the beginning of the negotiations, and leaving the UK and the EU with an ever shorter timeline in which to wrap things up. And we couldn’t rule out the possibility of another general election after that. There are also likely to be questions around the potential need to call another referendum, with some looking at today’s election results as a vote against PM May’s hard Brexit vision. And that possibility may be a factor in keeping markets reasonably well supported for now. We’ll be watching closely for comments from PM May later this morning, and comments from other Conservative party members to gauge the appetite for a change in leadership.”

“We note that today’s result has not unfolded into a broader risk event. S&P 500 e-mini contracts are slightly up while USDJPY have climbed back to approach highest levels of the week. Otherwise in markets, Dollar trades flat against most majors. Equity indices in Asia were mostly buoyant despite the elections turmoil in the UK. Japanese stocks on the Nikkei index rose by the most, close to +1%. Rates space saw little changes. NZGB 10yrs yields higher +2bps. Commodities saw gold dipping lower –0.2%.”