The pound looks to close for the weekend on a high, with sterling at 1.1849 against the euro at time of writing and 1.3158 against the US dollar. Yesterday we reported a positive turn in the markets following several opinion polls and increased odds of a Conservative majority at next week’s general election. Boris Johnson’s party has maintained their popularity over the last 24 hours, which incidentally coincided with a high for the pound.
Odds on for Tory Win
The odds of a majority for the Conservative Party rose to above 70% over the last day, the first time the odds have been that high for this general election. Betfair Exchange reported that the odds of a Conservative majority were at 72%. The pound to euro exchange rate rallied at 1.1861 after the news, which is the highest rate since the announcement of the election.
Likewise, this morning we’ve seen the pound to US dollar exchange rate reach a high of 1.3163. Interestingly, the pound to Australian dollar rate is at its highest since June 2016 and the EU referendum.
Size Matters for a Majority
At the moment, the election outcome looks good for the Conservatives, with markets responding positively to polls. Furthermore, a Conservative majority, and a decently sized one at that, would mean that the country will have more clarity over the Brexit process, and increase the likelihood of a swifter Brexit.
Assuming the polls are roughly correct and the Conservatives do secure a majority next week, all eyes will be on the size of the majority. A larger majority means that Boris Johnson will in theory, have little problem passing his Brexit deal and a subsequent deal on the future trading relationship between the UK and the EU.
A smaller majority could see something of a repeat of Theresa May’s troubles with the right wing of her party. Whilst Johnson has appeased the likes of Jacob Rees-Mogg and his fellow Eurosceptic ERG members, they will continue to push for as much regulatory divergence between the UK and the EU.
Weekend Polls Could Change Sterling’s Fortunes
The markets will be watching the result closely next week. It’s possible the weekend polls could bring some surprises or a closing of the gap between Labour and the Conservatives. Nevertheless, following the defection of several key Brexit Party figures on Thursday, Boris Johnson and his party are on a roll for now.
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