The highly anticipated UK general elections are finally here. Will Theresa May’s Conservative party triumph over Jeremy Corbyn’s Labour party?
Probably, yes. However, that’s not what this election is about. This election is about the Conservatives obtaining a strong majority which enables them to bypass niggly hard Conservatives and pestering hard Labour members in the Brexit negotiations.
Going into the election, the Conservatives held a robust 20-point lead over Labour. Today, Conservative’s lead has dropped to just 12.
Will Ms May’s gamble pay off? Only time will tell.
How will the pound react to a strong lead for May?
The pound will likely shoot up. A strong lead will give the Prime Minister the scope to largely ignore Eurosceptics or the pro-Europeans in favour of a balanced plan for Britain.
What’s next for the UK?
If Theresa May obtains strong roots in government Brexit negotiations will run smoother. A carefully plucked team will be assembled to ensure May’s chances of a bespoke deal with the European Union are met.
May will likely pursue a ‘hard Brexit’ sentiment as she echoes previous statements which will likely include a call to leave the single market and customs union in favour of far-away friends in Canada and America.
The Prime Minister will probably reiterate her plan to take back control of “borders, laws and money”
The path ahead will still be muddled with uncertainties for Britain, one that will surely be lined with comprise as May steers the nation towards the exit door.
What will the pound do next?
The prospect for a hard Brexit, in which access to the single market will be forfeited in favour of border control, is negative for the pound.
Additionally, economic performance in the UK is set to slowdown. A hard Brexit will take its toll on growth and confidence in Britain.
We are already starting to see the effects of the unravelling ties between the UK and the eurozone. Consumer spending has come down as higher inflation and a stunted labour market reduce wage stimulation.
After the vote to leave the European Union last June, sterling was hovering around the 1.24 mark. The pound could once again fall as the Prime Minister’s rhetoric of stripping ties with Europe persist. Meanwhile, inflation and lagging wages will further depress the pound.