FX FUNDAMENTAL ANALYSIS
it as an informal coalition. This is exactly what Theresa May is attempting to do with the DUP. At the time of writing, it looks like a Conservative minority government will be formed – propped up with the support of the DUP.
Howe v e r , if
a r rangement fails
this to
ma t e r i a l i s e , Labour then have the right to try and form a
coalition
or minority government of their own. The arithmetic of the election makes
this
s c e n a r i o unlikely.
Let’s talk about Brexit
nearly
The pound dropped nearly two percent against the dollar following the official exit poll on June 8th which predicted a Hung Parliament
We all know that the markets hate uncertainty. It’s why the pound dropped
two percent
against the dollar following the official exit poll being published on June 8th (it predicted a Hung Parliament).
This election result also raises 12 FX TRADER MAGAZINE July - September 2017
accused of pursuing a ‘Hard Brexit’ - a term used to describe leaving the customs union and single market. This path was being followed to an extent to keep the eurosceptic wing of the Conservative party in check. With an increased majority, Theresa May would have been
questions about the kind of Brexit Theresa May’s government will look to implement.
I believe that Theresa May called this election to give her more room to manoeuvre in Brexit negotiations. Before June
8th, the Conservatives were being
free to negotiate a more open Brexit
(something favour).
That brings us to an interesting caveat. A minority Conservative government
could still lead to
a softer version of Brexit being pursued. This is because the Cons e r v a ti v e s will need to compromise in order
to get the
support of the DUP. What you need to know as a trader is that the DUP are pro-Brexit. They have not pushed for the so-called ‘Hard Brexit’ that some in the Co nse r v a t i v e party favour.
Therefore, I see this as positive for the pound in the long-run. Traders should
watch Brexit negotiations very closely in the coming months and pay attention to statements from both the UK and EU.
Jarratt Davis
FX trader, Funds Manager Mentor and Author of
How to Trade a Currency Fund
the markets
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