Midweek update 11th - 13th December.
Good afternoon everyone.
As mentioned on Monday, there was a YouGov Poll due for release and it has shown the Tori lead shrink but still showing a majority which is why we have seen a dip in Sterling exchange rates but not by too much. "Over the last fortnight we've seen the Conservative lead and the number of seats they are projected to win gradually fall. There are two days until polls close and time for voters to change their minds," says Anthony Wells, Director of Political and Social Research at YouGov.
With the likelihood of a hung parliament slightly higher, this scenario would increase the risk that the UK could crash out of the EU on the 31st of January, which is why this would trigger a significant weakening of GBP initially. However this would only be in the short term until we saw what possible coalition could be formed and what their plan would be for Brexit. We could easily see a more positive long-term story if the UK is able to form a coalition and the EU accepts an extension, which would make a second referendum an option.
We've mentioned in the past that these Polls have historically not been accurate and after all, they were wrong in estimating the Brexit referendum outcome back in 2016, as well as the results of the 2017 election. As for the Pound, we repeat that the risks surrounding a hung Parliament and anyone with upcoming exchanges should speak with their broker to discuss making a possible exchange before the result on Friday morning.
There are no economic data releases of note in the UK, or the Eurozone. In the US, the November CPI is forecast to show a small rise in annual headline inflation to 2.0% (from 1.8% in October), while the core reading is expected to hold at 2.3%. For now the Fed remains more concerned that its preferred inflation measure is still below target.