What happens to the pound now?
An election it is then.
Theresa May is going in for the kill to try and cement Brexit. She's called this election to stamp out all the divisions that she has in Parliament and from parties that accept Brexit is happening.
Winning the election strongly should close the box on all the other parties sticking their oars in for their own agendas. This is potentially going to be a Brexit affirmation vote. May has reaffirmed we're coming out and now it's down to the people to decide who takes us out. On current form, that's not going to be Labour or anyone else.
This election cannot be a protest vote against Brexit as all the parties agreed to abide by the referendum, and the main arguments have been on what the government's negotiating position will be, and that all the parties get a say in the final deal. None of them (bar Scotland) have been arguing against Brexit. However, if any of them do set their manifestos on staying in, that could mean trouble but it would mean they would go against the majority decision from their own voters.
May's putting all the pressure on the other parties to come into line on Brexit and the choice for the voters is very narrow, go with the shambles that is the current opposition party, or stick with the current government.
On that basis the election should be a cake walk for May but a lot can happen in 8 odd weeks.
So to trading.
The first big risk comes on 4/5th May when the UK has local elections across the country (I need to check to make sure that these will still go ahead though). These will be viewed (as they were going to be anyway) as a vote of confidence in the government. The market will use this as a yardstick for the election. If May's government has a strong performance then the pound will likely strengthen. If she gets a bloody nose, that will see it sink. Whatever happens, it will set the tone for trading until the elections.
The Conservatives cementing their position in the election should naturally be pound positive (as are most elections when the ruling party keeps its place). There is a big "but" to remember though. All this (so far) does not change the Brexit picture and trading the next two years of negotiations. As soon as the election is over, we'll quickly switch back to trading that. Keep that in mind before thinking about cable going back to 1.40 or anything like that just on these elections. Right now we'll be trading UK politics, and then we'll move back to Brexit.
For the hear and now, markets will be deciding on what this election really means over the next few days. If current PA is any guide, it's being viewed as positive. I'm not so sure though until we hear the campaign positions from Labour and the other parties. If they are still for Brexit but just want to do it differently, expect the Conservatives to remain strong favourites and the pound to be supported. If there is going to be a Brexit battle MKII expect the mood to sour and hit the pound.
If May clears up at the general election, that should mean the UK will be able to negotiate Brexit without the domestic noise and disruption from the other parties. That could also help support the pound but it will just move the battle lines back to the negotiations.
There's never a dull moment with Brexit and at the very least, it should give us some decent volatility between now and the election. There's going to be lots of commentary from now on so stay nimble if you're trading the pound.
May puts another cat amongst the pigeons
Just in case you want something to keep in your bookmarks, I've added the election to the Brexit timetable post here.
