GBP/USD soars as Boris Johnson wins substantial majority, what happens next?
GBP/USD soars after Conservatives look set to win the largest majority since 1987. What next for the pound?
General election analysis and talking points
- Conservatives win largest majority since 1987
- GBP surges to fresh 2019 high
- Focus will shift to transition period
Conservatives: 351 (+46)
Labour: 201 (-58)
Lib Dem: 9 (-1)
SNP: 46 (+13)
Results in 629/650
Boris Johnson is on course for a landslide victory
If confirmed, this will far surpass the 326-seat majority needed to govern and thus will pave the way for a smooth Brexit process with Boris Johnson able to pass his deal through parliament (December 20th had been touted as a potential voting day) with ease and take the UK out of the EU at the end of January. In reaction to the initial exit poll, the Pound surged to a fresh 2019 high of 1.3514 amid the reduction in political uncertainty. On the technical front, we expect the Pound to consolidate its gains in the run up to the year end with risks tilted to the upside.
GBP/USD Price Chart: Daily Time Frame (Feb 2018 – Dec 2019)
EUR/GBP Price Chart: Weekly Time Frame (Mar 2015 – Dec 2019
Transition Period
With the Withdrawal Agreement expected to pass, focus will soon shift towards the transition period, due to expire at the end of 2020. Boris Johnson has previously stated that he would not ask the EU for an extension to the transition period (decision must be made before the end of June), making for a tight schedule for the UK and EU to agree an FTA (average time taken for a trade deal is 4yrs), which in turn keeps the risk of a no-deal Brexit on the table. However, given Boris Johnson’s sizeable majority he may feel less pressure to maintain his rhetoric that he will not extend the transition period.
From the EU’s perspective, Brussels expect trade talks will begin in March, noting that an ambitious trade deal is unlikely to be negotiated and ratified by December 2020 with only the possibility of a quick FTA on EU terms.
Bank of England
The election outcome is likely to see a reduction in political uncertainty that has stifled UK economic activity since the EU referendum, thus potentially prompting the Bank of England to shift towards a more neutral stance. That said, this will also be predicated on a notable improvement in UK data, particularly that of the jobs markets as well as a consistent rise in business investment going forward.
IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.
The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.
No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.
Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.
Trade on the general election result
- Go long or short with CFDs
- Speculate on key markets – including British indices, shares and GBP forex pairs
- Manage your risk with our range of stops and limits
Live prices on most popular markets
- Forex
- Shares
- Indices
See more forex live prices
See more shares live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.
See more indices live prices
Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.
