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Theresa May’s election gamble backfires!

UK election 2017 - Econ Alerts

June the 8th 2017 has seen Theresa May’s Conservatives party win the UK general election, but without a majority prompting a hung parliament. When British PM Theresa May called for a general election on the 19th of April it was widely expected her Conservative Party would win by a landslide. The polls had Theresa May’s Party 20 points ahead of the opposition party Labour but in recent weeks her lead in the polls slipped to between 1 and 12 points.

When Theresa May was made the UK’s Prime Minister after the resignation of David Cameron after the UK’s Brexit vote, she gave a promise not to hold a general election as the uncertainty will be unfavourable to the British economy. She then backtracked on her promise and decided to call for a general election. Her reason for this change was because there are forces trying to thwart the ongoing Brexit negotiations within the parliament, according to her. So to put strengthen her mandate on Brexit, Mrs May would be looking to secure a larger majority for her party. It must be said that the Labour party had been in disarray and was losing support all over the country, and this could be a possible reason for Theresa May’s U-Turn on holding a general election.

The gamble taken by the PM didn’t pay off, Conservative’s held 330 seats (331 including the speaker). Now she is left with 318 seats (at the time of writing, predicted 319). Theresa May promised to step down as leader of the Conservatives if she didn’t secure a majority vote, but now she is refusing to step down. This shouldn’t be a surprise as Mrs May seems to be used to breaking her own promises, the Conservatives will now look to form a coalition government with the DUP (Democratic Unionist Party), a party that is a strong supporter of Brexit.

The GBP/USD exchange rate had been moving in a range between 1.27 and 1.30 handles. In one of my previous videos, I stated that if you wanted to buy the Pound vs. the Dollar, then 1.273 (off by a few) would be a good level to buy. Below is a short 30-second snippet of the aforementioned video, if you want to keep up to date with future videos please subscribe to my youtube channel.

The GBP/USD and the FTSE 100 was falling in value at the beginning of the voting day, as markets were pricing in the predicted loss of Conservative seats. The morning after the election the Pound had a sharp fall in value to about 1.26 but during the day it has recovered somewhat.

Now that the UK election is out of the way, the markets will focus back towards Brexit and what type of deal the UK and Europe will agree to. Brexit negotiations will start in 10 days time on the 19th of June and the position Theresa May is in leaves the UK in a weakened position.

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