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How Will Markets React to the UK General Elections 2017?


When Theresa May called a snap election on April 18, polls indicated a comfortable 20 point lead for the Conservative party and a safe bet in her attempts to increase her party’s majority. Market sentiment soared, however, the tightening of the polls in the lead-up to the elections calls for a closer look on how the markets could be affected by each outcome.

A Conservative majority is still considered the most likely scenario and it is therefore expected to be interpreted as a positive result by traders. A Labour victory is currently out of the cards. Should it materialize, we would expect some serious knee-jerk reaction in the markets.

Key Markets to watch

The impact of the uncertainty in the lead-up to the election was mainly felt in the forex and indices markets with the two most affected instruments being the GBP/USD and the FTSE 100. The initial gains seen in the Cable at the announcement of the elections have been capped near the 1.30 area, while the FTSE 100 reached new highs above 7500, its best monthly return in 2017.

Expect high volatility in:

  • GBP/USD

EUR/GBP

FTSE 100

  • FTSE 250

Correlated markets that will be affected