I am flying to Singapore and then Hong Kong for our two Asian conferences this week, so this will necessarily be relatively brief – what does the British electorate have in store for us this time and will this UK general election, like so many other votes recently, leave the pollsters with egg on their faces?
The opinion polls would have us believe this is a relative walk in the part for Boris Johnson’s Conservative Party, but their recent performance is not crash hot when it comes to getting results right, and if there is one sign that things are less than clear cut, could it be how, ironically, the first day of campaigning was the day Johnson promised an EU exit come-what-may?
Sterling has had what I would term a cautious bid tone since it became clear that a no-deal exit was unlikely and this was gently reinforced after the election call. I was talking to someone last week who had already dismissed the outcome as a walkover for the Conservatives but felt compelled to remind them that the same was said ahead of the last election, which resulted in a hung parliament.
I totally accepted my conversant’s opinion that the main opposition Labour Party is led by someone in Jeremy Corbyn who the majority feel is unelectable to the station of Prime Minister, but felt obliged to point out that the UK political scene is much more complex than at any time probably since the 1600s.
Just off the top of my head I can think of the Scottish electorate, who are largely against Brexit and some of whom may forgo their conservatism to vote tactically (and I accept that the Tories win few seats in Scotland); Northern Irish voters, who are at the forefront of the EU-UK negotiations; the Labour “leave vote; the Conservative “remain” vote; the Liberal Democrats who are quietly recovering from a disastrous post-coalition period; the Brexit Party; and the Centre Alliance. How people are influenced by, or vote for, these groups will have a huge impact on this election, which is most definitely not about the economy and the traditional stance of the two main parties.
Opinion pollsters are still bruised by their frankly disastrous performance in the EU referendum and last UK general election, but I suppose looking on the bright side, this is an opportunity to throw light on a very confusing picture. Perhaps this is the election when the pollsters regain the public’s confidence? Alternatively, it could be yet another occasion on which that most subversive of groups – the British electorate – deliver another kick to the pollsters’ sensitive regions!
For the FX market it will be interesting to see how it performs under pressure. This is, like the EU referendum, a known-unknown, so preparations can be made, however the election takes place in mid-December, a month in which order books are often thin, meaning there is less protection for the market maker. Equally, for those reliant upon data, there are likely to be less updates and less traded volume upon which to form their price, so it could be a tricky time. Let’s not forget, this is the first UK general election in December since 1923, so comparable data is a little tricky to come by!
The run up to the vote will also represent a challenge, especially if the polls do tighten up or reflect a high degree of confusion. The timing of poll releases will be important to the FX market – let’s hope they are not released, for example, on the 10 O’Clock News in the UK as that will time nicely with the post 5pm New York “witching hour”.
Overall I suspect the market will handle things quite well, although there are bound to be a few sharp moves – how they develop, or rather don’t develop, is the key to the situation. As for the election; sitting a long way away but with many friends and family in the UK, I sense there is a desperation on the part of many – whether they voted leave or remain – to get the thing done, and that should mean the Conservatives get home. And if that doesn’t portend a volatile electoral process I don’t know what does!