There’s a non-negligible risk that a poorly-run campaign by the Prime Minister delivers shambles instead of enhanced majority
— SocGen’s Kit Juckes on Tuesday
I imagine this has probably occurred to those readers who have closely followed things in the lead up to the UK election, but it’s worth noting that while it looks really bad, the chart shown below will likely look a lot worse tomorrow if what we’re seeing in the exit polls ends up being borne out:
(Very) long story (very) short, this ain’t gonna cut it:
- Conservatives projected to win 314 seats
- Labour 266 seats
- Liberal Democrats 14 seats
- Scottish National Party 34 seats
- UK Independence Party no seats
- When last Parliament (650 seats) was dissolved on May 3, Tories held 330 seats, Labour 229, SNP 54, Liberal Democrats 9, UKIP 1
That would leave Theresa May’s Conservative Party short of an overall majority. In other words: a hung parliament.
That could stall Brexit negotiations and create all kinds of uncertainty, which is what the pound is trying to price in, but if this (the vote) doesn’t turn around, it’s going “bigly” lower. By many accounts, to $1.24-ish.
For their part, Mizuho’s Peter Chatwell doesn’t agree. To wit:
Drop in GBP reflects “an uncertainty discount, rather than pricing the fundamentals of a potential leftist shift in the U.K. government, with a softer Brexit stance. If the poll does turn out to be accurate, he expects GBP/USD to turn stronger on the session. If this exit poll solidifies into reality then this market reaction should be Trumpian, i.e. on realization of a softer Brexit stance and more fiscally easy outlook, we should be factoring in greater growth and inflation and gilt supply, generating a steeper gilt give and stronger GBP.
We’ll see, Peter.
In the meantime, here are some of the early Twitter reactions:
And best of all: