Conservatives lose ground in election race (Daniel Johnson)

May Shoots herself in the foot

Following Theresa May’s announcement of plans for the elderly to finance their own care if they have assets in excess of £100k we have seen Labour gain considerable ground in the polls. Their lead has been dropped from 20-14 points in the latest ICM/Guardian poll. The conservatives are in the lead at 47%, but Labour are gaining ground now at 33%.

The Tories were in a very strong position following the election announcement. A snap election usually causes the currency in question to weaken, but on this occasion the opposite occurred. A conservative government is deemed to be positive for the UK economy. Investor confidence grew and Sterling gained strength as a result. With the election a lot tighter than previously expected I would expect to see Sterling weakness due to political uncertainty. Looking at the last general election, we did not see any significant movement on the exchange until just before the event so be prepared for volatility when the election draws closer.

Inflation a worry for the UK economy

We have seen a rapid rise in inflation as of late. The latest data showed a rise form 2.3% to 2.7%. This is a direct result of the vote to leave the EU. The weak value of the pound is causing retailers to pay more for their imported goods. The increase in price is  now being passed down to consumers. The problem is the average wage is not increasing at the same rate as inflation, if the general public become reluctant to pay the higher prices we could have a recession on our hands. Keep a close eye on CPI data as this could have a major bearing on GBP/EUR moving forward.

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