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Why the future for the GBP looks gloomy despite the election outcome


By Giles Coghlan, Chief Currency Analyst at HYCM

Looking ahead for the GBP

Forecasting the future is inherently tricky. The main reason of course is that unexpected events can't be easily forecast. Yet, unexpected events can and do occur. Perhaps it is also being British and having lived through 3 years of Brexit indecision that this is a hard post to write. However, it is worth flagging in case you have taken the view that a firm conservative majority will be a one way ticket for more upside in the GBP. It's not that simple decision. Here is why:

1. The institue for Fiscal studies said that neither the COnservatoves of Labour parties have a credible fiscal plan. The Institute warn that higher taxes are ahead than either party has indicated.
2. UK confidence is running at the lowest levels since 2013 according to Gfk.
3. Add higher taxes to low consumer confidence and this in turn will weigh on consumption and economic growth.
4. This is the real issue - the limited transition period. What will be the EU's and the UK's long term relationship? This is still destination unknown. As a result, if the Conservatives win a majority. the GBP will spike and then it will back to trying to work out how the EU and the UK will work as bedfellows. There is still a great deal to be decided.


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Source: https://www.forexlive.com/news/!/why-the-future-for-the-gbp-looks-gloomy-despite-the-election-outcome-20191204
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