MARKET NEWS
Pound Sterling hits 6 Month Best vs. Euro on Rising Chances of Conservative Majority - PSL
- Pound-to-Euro exchange rate: 1.1658
- Pound-to-Dollar exchange rate: 1.2863
- Pound to remain bid in current environment
- Further advances dependent on polling
- Odds of a Conservative victory rise to ~60%
The British Pound has advanced on the Euro, Dollar and other major currencies over the course of the past 24 hours after the odds of a Conservative Party majority being secured at the December election were raised following the decision by the Brexit Party to not contest existing Conservative seats.
"This will likely help to build support for the Conservatives ahead of the December election as they won’t need to fight off challenges from hard Brexit supporting candidates. Farage will instead target anti-Brexit parties such as the Liberal Democrats and Labour in certain constituencies. Sterling spiked on the news that a Conservative government looks assured as the outcome of December’s vote," says Edward Bell, an analyst with Emirates NBD.
However, the decision by the Brexit Party to stand in key Conservative-Labour marginal seats means the Conservative's chances of securing an outright majority remains a difficult task, and this situation could well ensure any attempts by Sterling to make meaningful gains are ultimately capped.
Brexit Party leader Nigel Farage said the Brexit Party would not contest the 317 seats the Conservatives won at the last election, however they will still target Labour and Liberal Democrat seats across the country, the very same seats the Conservatives require to secure a majority. "We are the party that absolutely believes in this," Farage said. "If you want Brexit you can’t vote Labour anyway. Put us in there and we will hold the government to account. We’re trying to get a decent voice in parliament."
The Pound nevertheless rallied on the news that the Conservatives would not face Brexit Party candidates in existing seats, with markets believing that a Conservative majority would ensure a deal is passed relatively soon after a new Parliament sits, putting to an end months of uncertainty.
Any other outcome apart from a clear-cut Conservative majority would only likely complicate matters as far as Brexit is concerned, and another hung Parliament, or a Labour minority government is therefore held by markets to be on balance negative for Sterling.
The GBP/EUR exchange rate advanced to reach a best of 1.1679, its highest level since May 08.
