This Election Just Became Interesting: UK General Election 2017

June 9, 2017

 

GPDUSD reacts to election exit polls.

If you read my post from earlier this week, you’ll see that I placed little concern on the outcome of the British Election. I was not the only one, and it seems that more than a few traders have been caught offside here. Perhaps the French election lulled me into a false sense of security…Brexit and Trump seemed a distant memory.

The Cable Reacts.

The Cable fell almost 200 points on news that exit polls suggest Theresa May could have trouble forming a majority government. Moves like that are rare, and if anyone was caught long I hope that you (a) had a stop in place and (b) that stop was hit without too much slippage.

As traders in the UK wake up tomorrow and read the news, they’re in for an interesting surprise. Gold has come off, as has the Yen. This suggests that traders are not running to safe havens just yet, perhaps the opposite actually. While volume is generally low during the Asian session, elections usually see traders managing positions if needed. If this was a serious risk-off event, I would expect safe havens to receive significant flows here. This gives us an insight into how others are interpreting the election results.

What will be interesting is how equity markets interpret the election results. European equities have been mixed this week. US equities have been the same, especially with the Comey testimony coming today. The sentiment has been cautious, even if we haven’t seen a push higher in the VIX. Will this result add more caution, or will equities be nicely in the green by Friday night?

Markets do not like political uncertainty. Actions is choppy, and you can see large price swings on rumours and news. Stay nimble. Opportunities like this, especially in volatile GBP crosses (heck, even in the GBP/USD), are somewhat rare. If you have the appetite for risk there you can make plenty of pips…however you also risk your position moving sharply against you on news.

Good luck out there, manage your risk and make the most of the volatility.