Prime Minister Theresa May caused waves this morning by announcing early elections for Parliament on June 8th, three years earlier than scheduled. May aims to gain a stronger majority and unite the British government, citing opposition from other parties causing derision and weakening their negotiating stance with the EU: “the country is coming together, but Westminster is not.” This vote could give the Prime Minister and her Conservative Party a better majority and ease infighting.
Theresa May has a significant lead in the polls, but even if her lead is edged out this doesn’t spell doom-and-gloom for GBP. Many within the Conservative Party advocate “hard” Brexit – uncompromising on issues like immigration which threatens the UK’s access to the single market. Losing this access would jeopardize the UK’s preeminent position as the world’s largest euro clearing hub. Resurgent hopes for a “soft” Brexit are a positive for sterling, as this would prioritize access to the single market. Overall, the announcement of an early election will likely inject fresh volatility into the pound.
GBP/USD is up 1.5% today, hitting the highest levels since December 2016, euro also reacting positively rising 0.5% against the dollar.
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