MUFG Research discusses GBP/USD outlook around this week's UK election.
"Thursday 12th December at 10pm London time we will get the exit poll results of the general election and we believe the market is now very well positioned for a Conservative Party majority that is substantial enough to “Get Brexit Done” by 31st January 2020. The opinion polls have been remarkably stable in showing a consistent gap in favour of the Tories of no less than 10ppts. Spread betting markets suggest this might translate into a 30-seat majority.
We see that as sizeable enough to propel the pound further on Thursday night into Friday. We have long argued GBP/USD settling into a 1.3000-1.3500 trading range on the Withdrawal Agreement being passed. So by the end of the week we may well see GBP/USD at the top of the range – a temporary breach is feasible but is unlikely to be sustained," MUFG notes.
"Why? Well we would argue on a few metrics GBP/USD is looking stretched...GBP/USD at or above 1.3500 will be attractive levels to sell post an expected Tory election victory," MUFG adds.