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5 May 2015
GBP to trade defensively ahead of UK election - TDS
FXStreet (Bali) - GBP is likely to trade defensively ahead of (and possibly for a little while after) the UK election, notes the FX Strategy Team at TD Securities.
Key Quotes
"Latest polling suggests that the incumbent Conservatives have a slight edge but the likelihood of a majority for either of the two main parties remains remote, meaning that some form of a coalition government would need to be formed, possibly involving two of the minority parties. This may mean a relatively prolonged period of uncertainty. The risk of another snap election in the weeks or months to come should not be underestimated."
"Beyond the election uncertainty, we are fundamentally bullish on the GBP as decent macro fundamentals and Bank of England policy tightening (in early 2016) will eventually be topical again."
"We like the idea of selective GBP shorts to hedge against election uncertainty in the near-term (versus JPY) but we also think that volatility around the election outcome will provide attractive entry points for medium-term GBP longs (versus the EUR and CAD) on the assumption that a stable government will emerge and allow investors to focus on superior UK fundamentals."
Key Quotes
"Latest polling suggests that the incumbent Conservatives have a slight edge but the likelihood of a majority for either of the two main parties remains remote, meaning that some form of a coalition government would need to be formed, possibly involving two of the minority parties. This may mean a relatively prolonged period of uncertainty. The risk of another snap election in the weeks or months to come should not be underestimated."
"Beyond the election uncertainty, we are fundamentally bullish on the GBP as decent macro fundamentals and Bank of England policy tightening (in early 2016) will eventually be topical again."
"We like the idea of selective GBP shorts to hedge against election uncertainty in the near-term (versus JPY) but we also think that volatility around the election outcome will provide attractive entry points for medium-term GBP longs (versus the EUR and CAD) on the assumption that a stable government will emerge and allow investors to focus on superior UK fundamentals."