The UK General Election – The Pound Spikes on Election News

The big news of the day was an announcement from the Brexit party that they will not compete for 317 Conservative Party seats.

Concerns over the Lib Dems taking seats as a result of split voters led to the announcement today.

While Boris Johnson has talked down any possible alliance, Farage’s latest move has come in a bid to avert a 2^nd EU Referendum. Such an outcome would be more than likely should the Opposition Party or Lib Dems move into Number 10.

Farage will, however, compete for Labour Party and Lib Dem seats in particular. The move comes in spite of the Brexit Party leader having concerns over Johnson’s Brexit deal.

The UK Opinion Polls

Following the YouGov poll of polls that showed the Tories with a 7 point lead over Labour, the polls showed the Tories with a 13 point lead on Friday.

While the Tories had 39% of the vote and Labour with 26%, the Lib Dems were a distant third, with 17%. The Brexit Part was a distant 4^th, with 10%.

With the YouGov opinion polls giving the Tories a comfortable lead, another useful model is the Electoral Calculus, which estimates the number of seats each party would win.

At the time of writing, the model showed that the Tories would win 370 seats, giving a 90 seat majority. The Labour Party was projected to win just 186 seats.

For those who were expecting a return to 3 party politics, the Lib Dems were projected to win 25 seats.

Hung Parliament

While the polls showed a clear majority for the Tories, the chances of a hung parliament remained.

For this very reason, the Pound had perhaps been less responsive to the opinion polls and models than usual.

Farage may have brought any concerns over a hung parliament to an end, however.

The Pound

At the time of writing, the Pound was up 0.83% to $1.28789. A jump in the Pound in the last hour came on news of Farage deciding not to compete against the Tories.

If there were any doubts about the market’s preference, the jump in the Pound demonstrates that Johnson remains the market favorite.

An orderly departure from the EU rather than extended uncertainty under Labour…

Now that Farage has withdrawn from the race, the next set of opinion polls and projections will be key.

Assuming that Farage voters align with the Tories, then the 90 seat majority may well increase. More favorable projections would provide further support to the Pound.

If economists were looking at today’s stats, even disappointing economic data took a back seat…