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Brexit Briefing: UK Polls Give GBP Traders a Boost

Brexit Briefing: UK Polls Give GBP Traders a Boost

2017-05-31 14:15:00
Nick Cawley, Analyst
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Talking Points

- Sterling hit a near six-week low against the USD before bouncing back.

- German Chancellor wants the UK to remain a “good partner.”

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

GBP traders had an eventful morning session as two UK General election polls highlighted divergent voting intentions ahead of June 8th. The British Pound weakened early in the day, hitting a near six-week low, before shrugging off most of the losses as the second poll hit the wires.

The downturn in Sterling happened after pollsters YouGovsaid that the ruling Conservative party may win just 310 seats next, 16 seats short of a majority, leading to a hung parliament. The poll showed the Conservatives losing 20 seats while the main opposition party Labour gained 28 seats for a total of 257. The pollster however did note that there was a wide margin of error in its findings with a spread of Conservative seats ranging between 274 and 345.

A hung parliament would make already tricky Brexit negotiations harder with coalition parties expected to differ on a wide range of divorce topics making a unified UK negotiating position difficult.

GBPUSD made a low of 1.27690, the lowest level since April 21, before nudging higher as traders questioned the poll. Later in the morning session a second poll was released, this time by Panelbase, showing the ruling party extending their lead by 1% -- 48% to 33%. The fieldwork for this poll however was carried out over one week ago so may not fully reflect the recent gains Labour have seen in other polls in the last few days. GBP picked up after this release to trade around flat on the session at 1.28535.

Chart: GBP/USD 30-Minute Timeframe (May 29 – May 31, 2017)

Brexit Briefing: UK Polls Give GBP Traders a Boost

Chart by IG

Across the water German Chancellor Angela Merkel said that Germany would approach Brexit negotiations “in the spirit of Britain remaining a good partner.” This comes after UK PM Theresa May reiterated this week that “no deal was better than a bad deal” for Britain, highlighting to the EU that the she would leave the negotiating table if necessary. Divorce proceedings are expected to commence on June 19, eleven days after the UK General election.

Upcoming GBP/EUR Event Risk

Events

Date, Time (GMT)

Forecast

Previous

EUR Euro-Zone Manufacturing PMI (May)

June 1, 0800

57

57

GBP UK Markit Manufacturing PMI (May

June 1, 0830

56.5

57.3

GBP UK Markit Composite PMI (May)

June 5, 0830

56.2

Markets

Index / Exchange Rate

Change (Exchange Hours/GMT Session Rollover)

Market Close/Last

FTSE 100

0.28%

7,542

DAX

0.20%

12,612

GBP/USD

0.04%

1.28625

EUR/USD

0.42%

1.12320

EUR/GBP

0.37%

0.87313

--- Written by Nick Cawley, Analyst

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

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