UK election: No 'buy the GBP rumour, sell the fact'
July 4 (Reuters) -The market goes into Thursday's UK election net long of sterling but the resultis unlikely to prompta 'buy the rumour, sell the fact trade', as a new stable government should provide demand on dips.
The polls forecast a landslide victory for Labour Party leader Keir Starmer after 14 years of turbulentConservative government, leaving the economy struggling with constrained finances and slipping living standards.
Markets are priced for a Labourgovernment with a strong majority in parliament supportingits centre-left policies, which will take time to flow through the economy.
Positioning will be a major factor for the market response to the election; the latest IMM data showed GBP longs slipped from 47,621 contractsto 44,048 as of June 25, so long but not extreme.
The European Union is the UK's largest customer, and Labour wasagainst Brexit, so although there is no chance of rejoining the EU, a closer relationship and less regulatory conflict for business is viable, which wouldunderpin the pound.
The political turbulence around elections in the U.S. and France could lead to increasing safe-haven sentiment towards UK markets.
GBP/USDheads into the election at a three-week high with the USD index =USD near three-week lows. Daily sterling momentum studies climb as Bollingerbands contract and 5, 10 and21-day moving averages coil - daily and weekly charts show no strong bias.
Wednesday's 1.2679 low and last week's 1.2613 base are initial support, while the 1.2776 New Yorkhigh, and 1.2859 June high are the first resistance.
For more click on FXBUZ
Andy https://tmsnrt.rs/4eQpNFC
IMM positioning https://tmsnrt.rs/3LcNfzk
Andrew Spencer is a Reuters market analyst. The views expressed are his own. Editing by Sonali Desai
Related Assets
Latest News
Disclaimer: The XM Group entities provide execution-only service and access to our Online Trading Facility, permitting a person to view and/or use the content available on or via the website, is not intended to change or expand on this, nor does it change or expand on this. Such access and use are always subject to: (i) Terms and Conditions; (ii) Risk Warnings; and (iii) Full Disclaimer. Such content is therefore provided as no more than general information. Particularly, please be aware that the contents of our Online Trading Facility are neither a solicitation, nor an offer to enter any transactions on the financial markets. Trading on any financial market involves a significant level of risk to your capital.
All material published on our Online Trading Facility is intended for educational/informational purposes only, and does not contain – nor should it be considered as containing – financial, investment tax or trading advice and recommendations; or a record of our trading prices; or an offer of, or solicitation for, a transaction in any financial instruments; or unsolicited financial promotions to you.
Any third-party content, as well as content prepared by XM, such as: opinions, news, research, analyses, prices and other information or links to third-party sites contained on this website are provided on an “as-is” basis, as general market commentary, and do not constitute investment advice. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, it would be considered as marketing communication under the relevant laws and regulations. Please ensure that you have read and understood our Notification on Non-Independent Investment. Research and Risk Warning concerning the foregoing information, which can be accessed here.
