Current ICM/Reuters poll shows:
- 42% Conservatives
- 32% Labour
- 15% Liberal Democrats
- 5% Brexit Party
Whilst the two leaders will no doubt answer questions on a broad range of topics and issues the two areas that financial market traders will be particularly interested in will be:
Brexit - Pound traders will be looking first and foremost at Brexit. Labour’s position is still unclear. That said, given that the Conservatives are strongly ahead in the polls, even if Jeremy Corbyn did clarify his position one way or the other the pound’s reaction would be limited.
Market unfriendly policies – Conservatives historically support market friendly policies, whilst the Labour party’s polices are traditionally less so. Just last week Jeremy Corbyn pledged to part nationalise BT to bring free broadband to the country. Any further mention of nationalising other firms or sectors could see those stocks drop sharply on the open on Wednesday. The pound could also dip on any such pledges as investors worry abut the impact on UK economic growth.
The pound has surged in recent sessions hitting a six-month high versus the euro on Monday as investors become increasingly more confident that the Tories will win the 12th December election. Today, sterling is slipping ahead of the debate.
A strong Conservative win in the elections would not only mean more market friendly policies, but more importantly, that Brexit should pass through Parliament and by the 31st January deadline. Yesterday Boris Johnson confirmed that those Conservatives standing for election had pledged to support his Brexit deal. A Tory majority means avoiding a no deal Brexit.
Heading into the debate Boris Johnson is comfortably ahead in the polls with a double-digit lead. However, this also means that he has the most to lose. Should Jeremy Corbyn perform well, and he walks away from the debate with more support, the pound could give up some recent gains.
We often discuss the relation between the pound and FTSE. A weaker pound often boosts the FTSE owing to its high number of foreign companies. However, should Corbyn perform well and boost his support, there are several sectors which could decline on Wednesday including utilities, domestic focused banks, particularly RBS and telecom firms.
Pound levels to watch:
The pound trades above its 50, 100 and 200 sma and momentum remains to the upside. Resistance can be seen at $1.2985, $1.3013 before $1.3045 and $1.3080. Support is seen at $1.29, $1.2820 and $1.2760.