It's Election Day across the U.K, and millions of voters will determine what happens next with the Brexit saga, which has lasted three years. If Prime Minister Johnson can win an outright majority, the British pound could respond with significant gains.
GBP/USD is in positive territory on Thursday, as the pound continues to move higher. Currently, the pair is trading at 1.3219, up 0.15% on the day.
In what has been billed the most important election in a generation, British voters will determine not just the next government, but also the fate of Brexit, which has torn the nation for the past three years. Conservative Prime Minister Johnson has promised to take the UK out of the European Union by the end of January and then negotiate a trade deal with the bloc. Labor leader Jeremy Corbyn has promised voters another chance to vote on Brexit, perhaps by a referendum. The most recent election polls give Johnson the lead, but it’s unclear whether he will win a majority in parliament. It remains to be seen if Johnson’s catchy motto of ‘Get Brexit Done’ will resonate among voters.
What does this mean for the British pound? Investors like Johnson’s pro-business agenda, so a majority victory would likely lift the pound. If Johnson is faced with a minority government or Corbyn wins in an upset, I would expect the pound to face significant downward pressure. Whatever the outcome, we could see volatility from GBP/USD when the first results are released after the polls close (22:00 GMT.)
GBP/USD showed some upward movement on Wednesday and tested the 1.32 line, which remains fluid on Thursday. Above, there is support at 1.3260, which was last tested in early March. On the downside, the round number of 1.3100 has some breathing room in support, with GBP/USD moving higher.
USD/CNY is down slightly in Thursday trade. The pair is currently at 7.0307, up 0.11% on the day. The yuan remains close to 7.0400, which is an immediate resistance line. If the pair can break above this line, it has room to make strong gains, with the next resistance line at 7.0480.
AUD/USD is trading at 0.6883, up 0.11% on the day. The pair climbed close to 1.0% on Wednesday, as the Aussie hit a 1-month high. There was positive economic news on Thursday, as the Melbourne Institute Inflation Expectations index gained 4.0% for a second straight month. This is an important inflation indicator, as inflation expectations often translate into actual inflation figures.
NZD/USD followed the Australian dollar on Wednesday and made considerable gains. Currently, the pair is trading at 0.6584, up 0.05% on the day. There are no New Zealand events on the schedule, so I expect the pair to remain steady for the remainder of the day.
Kenny is an experienced market analyst, with a focus on fundamental analysis. Kenny has over 15 years of experience across a broad range of markets and assets –forex, indices and commodities.
