FX FUNDAMENTAL ANALYSIS Why was called?
Before we look at the election result, let’s look at why the election was called. It provides some important context.
It’s
pretty The
actually simple. current
British Prime M i n i s t e r , T he re s a May of the Conser v a t i v e Party, believed it was the opp or t u n e time to win a bigger majority in parliament. The
official
g ov e r n me n t opposition - the Labour Party - were trailing substantially in the polls and have suffered heavy losses elections.
the markets
The pound soared to six-month high after Theresa May called general election
in recent local
But it wasn’t just the polls that favoured the Conservative Party -
did too. After
Theresa May’s announcement on Tuesday 18th April, the pound jumped over 2% to a six-month
10 FX TRADER MAGAZINE July - September 2017
get a clear mandate to strengthen her hand for Brexit negotiations.
Let’s be honest. It looked like a smart move from Theresa May. Her party enjoyed a commanding lead over the opposition. However, just like with Brexit and Trump, the polls got it wrong.
However, Theresa May herself didn’t admit that her popularity was the primary reason for calling an election. She cited the need to
the election high over $1.29.
Why did the market favour a Conservative win?
An election win for the Conservatives was favoured by businesses and investors. Te current government has embarked on programme of reducing corporation
tax
to 19% for 2017. Tis is one of the lowest corporate tax rates in the world and has been a driver for foreign direct i n v e s t me n t . R e m e mb er , Foreign Direct Investment helps strengthen a currency because of the laws of supply
and demand.
T h e Co n- servatives are also seen as the more fiscally
hawkish
party compared to Labour - who have pledged to end austerity and initiated significant public spending.
Explaining a Hung Parliament
Firstly, let’s explore what a ‘Hung Parliament’ actually is. In the UK,
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