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Conservative Party Secure Majority, Markets Reaction

13 December 2019PoliticsEconomicsUK

As the Polls had predicted, and Citi Analysts base scenario, the Conservative Party secured a majority in Parliament at the UK General Election.

The majority of 363 seats*, provides the Conservative Party with a comfortable majority of seats, providing a clearer course for the Brexit Withdrawal Agreement.

The exit polls released at 22:00 GMT (12th December) predicted a sizeable majority (368 seats) for the Conservative Party, with the results echoing the expectation throughout the night.

Impact for Sterling assets

Citi Analysts expect

  • FTSE 100 increased +1.05%% to 7,349** in the early morning session, potential upside for UK Small Caps equity due to domestic focus.
  • Gilt yields increased as investors sold government bonds to cycle into equity
  • Citi analysts predict an initial economic boost, due to a clearer Brexit direction, but further uncertainty as trade negotiations continue.
  • Possible fiscal stimulus in the medium term may offset some economic headwinds during transition

How has GBP reacted in the currency markets?

Sterling had been trending higher since September on the reduced risk of a 'No Deal Brexit,' as the opinion polls correctly predicted a sizeable margin for the Conservative Party in recent days, GBP/USD had been edging higher***.

Citi Analysts are optimistic over the medium term, with the most recent forecasts expecting GBP/USD to be trading 1.3500 in 6-12 months.

The recent event provides an opportunity to discuss with your relationship manager, and our specialist teams (Portfolio and FX Counsellors) as to any impact the election outcome result has had on your portfolio.

*363 seats confirmed as of 7:47am 13/12/2019
**Source: Bloomberg UK 100 8:31
**Source: Bloomberg: GBP/USD Spot 9/12/2019 – 13/12/2019


Joe Bond

Head of FX Sales

Prior to joining Citi as an FX Counsellor, Joe joined Citi after four years as the Director of a start-up FX broker. His earlier roles were as an FX Dealer based in London and the Middle East. He is a keen traveller, and enjoys skiing each season.

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