Is the Tory Party on course for a big majority victory?
Sterling jumped back towards the 1.295 level against the US dollar this morning, extending its gains for the past 24 hours to around three-quarters of a percent.
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nvestors are growing increasingly confident that an end to the current Brexit impasse could finally be on the horizon following the 12th December general election. If last night’s MRP (Multilevel Regression and Post-stratification) model from YouGov is anything to go by, Johnson’s Tory Party could be set to achieve a sizable majority at the upcoming election, which would effectively ensure his Brexit deal passes without a hitch.

The model, which accurately predicted a hung parliament at the 2017 election, suggests that the Tory Party is on course to obtain 359 seats, up from 317 achieved last time out, and a majority of 68. Jeremy Corbyn’s interview with BBC broadcaster Andrew Neil earlier in the week, which by most accounts was somewhat of a misstep at the very least, has also boosted the Tory’s perceived chances of winning and in the process helped sterling on its way higher.

The lack of an even more sustained upward move in the pound through the 1.30 level could be attributed to the fact that the Tory lead has not necessarily grown in the polls in the past few days, rather plateaued around the 10-12% range. Bookmakers do, however, remain highly confident that a Tory victory is by far the most likely scenario. Implied bookmaker odds are now showing an approximate 95% chance of the Tories winning the most seats and around a 70% chance of a majority victory (compared to 7% and 5% for Labour).

Figure 1: Implied Probability of UK Election Results

Source:Oddschecker Date: 27/11/2019
Growing bets in favour of Tory victory have lifted the pound back to a six month high versus the euro, with the currency edging back towards its strongest position versus the dollar since May. We expect volatility in the pound to be higher than usual in the coming days, with now just two weeks left until polling day.

US markets closed due to Thanksgiving holiday



With the US FX market closed today due to the Thanksgiving holiday, activity across the pond will be limited, with no economic data releases on the docket.

Attention in the next couple of days will instead be back on the Eurozone, with a number of critical data points set for release in Europe. First up will be this morning’s consumer and business confidence figures, most of which are expected to show a modest improvement in November. We will then look to this afternoon’s German inflation numbers, which should give us a decent idea as to the strength of tomorrow morning’s Euro-wide CPI print. Both the core and headline numbers are expected to have ticked higher this month. This would be a very welcome development for policymakers at the European Central Bank and may cause investors to dial back on expectations for an imminent increase in the bank’s stimulus programme.
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