Sterling (GBP) Price Outlook Dependent on UK Election Opinion Polls
GBP price fundamental forecast: neutral
- Opinion polls ahead of the UK General Election on December 12 will dominate GBP trading in the coming week.
- Larger poll leads for the ruling Conservative Party will likely lift Sterling while improvements by the Opposition Labour party will likely weaken it.
- However, breaks out of recent narrow trading ranges are not expected until after the election results.
GBP trading dominated by UK General Election
Opinion polls ahead of the UK General Election on December 12 will dominate Sterling trading in the coming week, with continuing indications that the ruling Conservative Party will win an overall majority likely to boost GBP while any signs that the opposition Labour Party is catching up will likely weaken it.
The most recent polls have shown the Conservatives with a lead of between 7% and 11% but Labour has been catching up and traders will be waiting to see whether the Conservative lead dips to levels where a hung parliament – with no overall majority by any party – becomes a possibility.
That said, GBP has been trading within narrow ranges in recent days and it seems unlikely to break out until the election result becomes clear in the early hours of December 13. Attention will then return to Brexit and whether there is a Parliamentary majority for Prime Minister Boris Johnson’s Brexit deal with the EU.
GBP/USD Price Chart, Four-Hour Timeframe (October 15 – November 29, 2019)
Chart by IG (You can click on it for a larger image)
There are few economic figures on the calendar in the week ahead, with final purchasing managers’ indexes for November the only data of note. The next Bank of England interest rate decision is not until December 19, a week after the election, so monetary policy will be sidelined in the next seven days.
For a full rundown of all market moving economic data and events see the DailyFX Calendar
GBP/USD trader sentiment data bearish
As for retail trader positioning, the latest IG client sentiment data show 56.56% of traders are net-long, with the ratio of traders long to short at 1.30 to 1. The number of traders net-long was3.86% higher on Friday than on Thursday and 14.14% higher than a week earlier, while the number of traders net-short was 2.84% lower than on Thursday and 0.99% lower than a week earlier. At Daily FX, we typically take a contrarian view to crowd sentiment, and the fact traders are net-long suggests GBP/USD may fall. Traders were further net-long than on Thursday and a week earlier, and the combination of current sentiment and recent changes gives us a stronger GBP/USD-bearish contrarian trading bias.
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--- Written by Martin Essex, Analyst and Editor
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.