Jim Reid of Deutsche Bank has warned clients that the Conservative lead has been slightly whittled away in recent days:
The weekend polls showed a wide spread of Tory leads from 6pts to 15pts but with the average edging back above 10pts after recently dipping below. A reminder that anything below a 6-7 point lead is around hung parliament territory.
The closely-watched MRP opinion poll, released on Sunday, also gives the Conservatives a solid lead of Labour — with a majority of 38.
But… it comes with a warning that many voters are undecided, so that majority could yet evaporate.
This chart shows how the pound has rallied against the euro in recent weeks, to this morning’s 31-month high.
However, it’s still around 8% weaker than before the EU referendum in 2016.
Introduction: Sterling rallies as Tories extend lead
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
With three days until polling day, the City is growing increasingly confident that Boris Johnson is heading back to Downing Street with a healthy working majority.
Fears of a hung parliament are receding, as the Conservative Party extends its sizeable lead in the opinion polls. This has lifted the pound to a new 31-month high against the euro this morning, touching €1.19 for the first time since May 2017 (just before the Tory’s lost their majority in a snap election).
Sterling is also rallying against the US dollar too, up 0.25% to $1.318 – a seven-month high.
The rally comes as pollsters Survation give the Conservatives a 14-point lead over Labour, at 45% of the vote vs 31%.
That would surely be enough to guarantee a Conservative majority, who could drive Boris Johnson’s Brexit bill through the Commons by January 31st.
But elections are unpredictable beasts — so traders could yet get a nasty shock after the polls close on Thursday night.
Elsa Lignos of Royal Bank of Canada points out that undecided voters could still swing plenty of seats:
There are two main possible outcomes for this week’s election which will shape the UK for possibly decades to come:
(1) A Conservative majority government (exit from the EU at end-Jan on terms of Withdrawal Agreement and then still TBD, the free trade agreement that has to be negotiated by the end of the transition period);
(2) A hung Parliament that would see a further delay to the UK’s EU exit and potentially a second referendum.
Bookies odds show a Tory majority as a near certainty, in line with the steady gap in most (but not all) opinion polls. But there is a historically high number of undecided voters which could affect as many as 80 marginal seats. We will be neutral GBP going into Thursday and look to trade the outcome.
The election campaign will continue today across the country, with Labour outlining its plans if it defies the polls and forms the next government….
Also coming up today
Asian stock markets have rallied overnight, after last Friday’s US jobs report came in much stronger than expected. Europe is likely to be subdued, though, having ended last week strongly.
On the data front, research group Sentix publishes its latest survey of eurozone investor morale.
- 9.30am GMT: Eurozone Sentix Investor Confidence survey; expected to fall to -5.3 from -4.5