Date: 13 Dec 2019
The pound’s reaction to the Conservative landslide is a sigh of relief from markets. Sterling gained almost 2% following the publication of the first exit polls, which pointed at a comfortable majority for Boris Johnson and the defeat of Jeremy Corbyn, the less market-friendly opposition candidate. The Conservatives’ solid majority will finally push Brexit through to the next stage. Britain will leave the EU on the 31st of January and negotiations for a future trade deal between the two sides will start. However, even though Brexit will be out of the way, a new chapter will begin, with uncertainty still lingering over what the final outcome of the trade deal negotiations that will follow it will be. For this reason, the pound’s gains are, for now, capped at around the $1.35 level.
Ricardo Evangelista – Senior Analyst, ActivTrades
Share markets are trading significantly higher in the last trading session of the week with the trading mode set to “full risk-on”. This sudden boost to risky assets has been built by two main drivers: the strong UK election results and approval of the US-Sino phase one deal by President Trump. Volatility and, more importantly, directionality are now back on track as most benchmarks are now heading for a Christmas rally with traders targeting higher tops. Unsurprisingly, the FTSE-100 Index in London is the best performer in Europe, boosted by higher confidence in the UK’s future economic outlook following the Tories’ strong victory overnight. The gains are even more noticeable on the FTSE-250 Index, with the companies on this broader index much more representative of the UK’s domestic economy. Prices are now trading well above 21,500pts at 21,680pts. These moves send the clear message that traders who have been avoiding UK assets for the past three and a half years are now welcoming the new mid-term clarity brought by such a result. However, after this solid reaction investors will now be waiting cautiously for the next commercial developments in both Europe and the US, and this will cap gains for UK assets in the mid-term.
Pierre Veyret– Technical analyst, ActivTrades
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