Election infographic
Election May 2015 Future of Sterling: Possible outcomes Content key GBP has downward pressure, weak effect GBP holds its price GBP has downward pressure, strong effect GBP has somewhat positive effect Likely Labour-centric coalition Conservative-centric coalition Implications Implications Short-term Short-term •Initial market concern over spending plans •Economic policy initially uncertain •EU issue may be just parked — uncertainty saved for later •Neutral to Sterling, initially positive with continued austerity •EU referendum set for 2017 — lingering uncertainty increases Sterling volatility •If referendum plans advanced due to coalition, then probably large short-term drops in Sterling / rise in price volatility Long-term •UK future uncertain if SNP is in the coalition •Downward pressure on Sterling, which may or may not recover depending on economic and fiscal news in the following months Long-term •Markets concerned about scheduled EU referendum Possible Hung Parliament — No coalition Possible confidence and supply agreement with conditions Labour Minority Government Conservative Minority Government Implications Implications Short-term Long-term Depends on what happens next. •New election? •Continued minority government? •Sterling volatility high and pound weakens in almost all circumstances •Spending plans uncertain •EU issue unclear •Sterling drops on uncertainty •Sterling volatility increases •Markets very unsettled for an unforeseeable length of time Unlikely Labour Majority Government Conservative Majority Government Implications Implications Short-term Short-term •Initially positive response from financial markets •Initial market concern over spending plans •Economic policy uncertain at first Long-term Long-term •EU issue may be just parked — but for 5 years •Downward pressure on Sterling, which may or may not recover depending on economic and fiscal news in the following months •EU referendum set for 2017 — lingering uncertainty increases Sterling volatility •Markets happier with continued austerity Note that GBP rate is also affected by what is happening in other countries/regions (eg Eurozone or US) Stay informed with biweekly updates on FX ahead of election in May 2015 At Currencies Direct, we are proud to see ourselves as a business partner to our clients. Our role is to provide not only foreign exchange dealing services, but also analysis to help our clients plan their future currency needs and transactions. E [email protected] T +44 (0) 20 7847 9480 W currenciesdirect.com/business
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