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Brexit Briefing: Polls Show UK Ruling Party Extending Its Power Base

Brexit Briefing: Polls Show UK Ruling Party Extending Its Power Base

Nick Cawley, Senior Strategist

Talking Points

- GBP continues to garner strength from strong Conservative Party polling intentions.

- Official data may point to a weakening UK economy, limiting GBP upside.

- See the DailyFX Economic Calendar and see what live coverage for key event risk impacting FX markets is scheduled for the week on the DailyFX Webinar Calendar.

In a week when European Commission president Jean-Claude Juncker and chief negotiator Michel Barnier visit the UK to start Brexit talks with the UK, PM Theresa May will feel emboldened by her current strong standing in the polls ahead of the June 8 UK General Election. A stronger showing in the upcoming election, increasing the Conservative Party’s electoral base, will help the PM push through potentially difficult Brexit bills through both the Lower and Upper Houses.

The latest ComRes voting intention poll shows the Tory Party at 50%, the highest level for any political party since 2002, while the main challenger, Labour, polled 25%. Pollster YouGov showed the Tory party leading the Labour Party by 48% to 25% while the latest Survation poll also gave the government a double-digit lead, but this time of just 11% over the opposition.

And the latest IG poll also showed the ruling party extending its lead, with investors expecting the Tory Party to get 382 seats out of the available 650 in the election against a current count of 330. This majority would leave UK PM May able to push through most bills in the House of Commons without looking for support from other parties. A strong showing would also strengthen the PM’s hand when she hands the final Brexit bill to the House of Lords for approval, with the un-democratically elected institution unlikely to vote against the will of the voters.

The British Pound has kept its recent gains and is trading back up towards levels not seen since October 2016. A break above the 1.29060 level could see GBPUSD push back towards the September 5 high of 1.34457 although data headwinds may limit, or slow, the move.

Chart: GBPUSD WeeklyTimeframe (June 2016 – April 2017)

Chart by IG

While political momentum shifts in the government’s favor, recent hard data point to a downturn in the UK economy, with perhaps worse to come as full Brexit talks near post-June 8. The latest retail sales figures posted the biggest quarterly fall since 2010, while recent manufacturing and industrial output data missed expectations. On Friday, the first release of 1Q UK GDP is likely to show the economy growing by just 0.4% against the previous quarter’s 0.7%.

And the latest IG Client Sentiment Indicators also point to further gains for the British Pound.

Why and how we use IG Client Sentiment Indicators in trade setups – See our free guide

Upcoming GBP Event Risk

EventsDate, Time (GMT)ForecastPrevious
UK CBI Retailing Reporting SalesApril 27, 0900 GMT 6 9
UK GfK Consumer Confidence (April)April 27, 2201 GMT-7 -6
UK Gross Domestic Product (Q-o-Q) 1Q PApril 28, 0830 GMT 0.4% 0.7%

Markets

Index / Exchange RateChange (Exchange Hours/GMT Session Rollover)Market Close/Last
FTSE 1000.31%7,288
DAX0.17%12,470
GBP/USD0.11%1.28100
EUR/USD0.41%1.09130
EUR/GBP0.31%0.85180

--- Written by Nick Cawley, Analyst

To contact Nick, email him at nicholas.cawley@ig.com

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