The currency specialists of the investment banks of the City of London are preparing to live another intense night, given the possibility that the results of the general elections held today by the United Kingdom can cause significant movements in the pound during the early hours of Friday.
If so, there will also be strong ups and downs in the morning on the British Stock Exchange and in some European parks with strong exposure to the British market, such as the Spanish Ibex.
The polling stations plan to close their doors at 10 p.m. London time. At that time the polls will be known on foot of urn, but the official results will come dripping from midnight. If the result is uncertain, investors will not be clear about the outcome until after 3 in the morning, warns Adrian Paul of the US bank Goldman Sachs.
The Japanese firm Nomura anticipates four potential results, with immediate effects on the pound during hiring hours in Asia. If the majority of the polls are confirmed, and the Conservative Party achieves a comfortable position in Parliament, the sterling could rise 1-2%, given the expectation that the pact with Brussels will be implemented for a Brexit ordered in January 2020.
In the case of a more tight majority, in which Johnson depends on the more Eurosceptic wing of his formation, the pound could lose less than 1%. The currency would fall 1-2% if the Tories stay close to the majority and need the Irish Unionist Party (DUP) to govern, which could lead to reopening the Brexit agreement, according to Nomura.
Andrew Wishart, of Capital Economics, points out that the market has already discounted Johnson’s broad victory. If confirmed, the pound can rise to 1.20 euros (now at less than 1.19 euros). If the Eurosceptics or the DUP become the key to govern, the currency can fall to 1.14 euros, as the risk of a sharp Brexit reappears. If Labor leader Jeremy Corbyn surprises and comes to power, the currency will fall to 1.12 euros, estimates that firm.
According to Alex Batten, currency expert at Columbia Threadneedle, there is another scenario that would be very positive for the pound, although remote. It would be an alliance of conservatives and liberal-democrats, maintaining the current economic policy and organizing a new Brexit referendum. The pound could go to $ 1.40 (now at 1.32), he calculates.
On the stock market, a drop in the pound would encourage Ftse 100 tomorrow (plagued by multinationals) and would cause declines in Ftse 250 (with British domestic companies) and in Ibex groups such as Santander, Ferrovial, Telefónica, Iberdrola and Sabadell.