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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
If you prefer to trade indices, keep in mind the FTSE 100’s tendency to move towards the opposite direction compared to the sterling as 70% of its constituents are dollar earners.
The FTSE 250, on the other hand, is more domestically focused and therefore a more accurate barometer of the British economy.
IMPORTANT NOTE REGARDING TRADING KILLA GORILLA FX ROBOT:
We recommend NOT to trade your Killa Gorilla FX Robot prior and during the UK Elections due to the expected volatility. Although potential profits generated may be greater than normal, the possibility of large trending in one direction is quite likely.
The Killa Gorilla FX Robot Team