Unless you are living under a rock, you have heard of the convincing victory of the conservative party in the UK election. While the count is not final, Boris Johnson Conservative has secured 364 out of 650 seats (the majority of 78) significantly lowering uncertainty. With the Conservative, party regains control of the House of Commons withdrawal agreement will move through government quickly, triggering the UK exodus from the EU at the end of January. GBP was the big FX winner gaining nearly 2% against the USD on exit polls results. EUR/GBP fell 2.5% to lowest level since 2016 at 0.8276. While a longer-term threat, the SNP strong gains in Scotland has revived the threat of secession. Ahead of the next milestone December 2020 Brexit deadline the UK economy should have room to improve. With a no-deal Brexit, off-the-table business confidence should recover, as the domestic policy over the next five years is clear. Critical trade talks with EU next years will be complicated however; with the threat of Labour’s socialist agenda eliminated fears of a rise in corporate tax and wage will allow firms to invest domestically. We caution FX trades against closing the book on Brexit. Conservatives’ transition manifesto indicates there will be no extension beyond December 2020. Boris will head to Brussels with a clear mandate but will run into the 28 hardline Eurosceptic MP that voted against May Withdrawal Agreement. The probability that in 3Q 2020 we are discussing a Brexit collapse remains high.
Conservatives Gains Clear Mandate For Brexit
