The UK PM has called for general election on June, 8th. How this sudden decision might affect global markets and May? See top 5 UK Snap election risks.
20 April, AtoZForex - The Prime Minister of the UK, Theresa May has shocked political opposition and international observers this Tuesday. Ms. May has called for a snap general election on the 8th of June. Such move will allow her to form a united government prior to the upcoming Brexit divorce talks.
Top 5 UK Snap election risks for Theresa May
Some experts believe that Ms. May is aiming to gather a greater amount of parliamentary seats. This would provide her with an opportunity to implement her planned ‘hard Brexit.’ Moreover, recent developments in the UK suggest that people should eye the opinion polls. The experts believe Ms. May’s decision might be harmful to the UK’s political stance. Today, we discuss Top 5 UK Snap election risks to watch for.
Theresa May’s destiny
Ms. May has been hesitant to call an early election. Such move is an unexpected shift from her previous direction ‘Brexit means Brexit.’ Market experts believe that this change will be perceived as her moment of ‘reckoning.’ Previously, Ms. May has been claiming that she will not call for the snap election till 2020.
Moreover, a ‘Yes’ vote back in June 2016 is important not only for safeguarding greater Conservative power, but also for public confirmation. This vote allowed May to proceed with her Brexit vision with more confidence. As of now, Conservatives hold 330 of 550 seats. In the case of the loss, Ms. May would have to review her decision to exit with her previously pro-EU approach. The research note by Teneo Intelligence, an international advisory firm, has highlighted:
"The main political risk is that May is taking a massive bet on her own popularity."
The latest YouGov poll states that Conservatives would win the election with 42 percent of votes. The biggest competitor, Labour party would emerge from the election with 27 percent of the votes. The Liberal Democrats now stand at 11 percent, with UKIP having 10 percent of the votes. The remaining 10 percent are divided between smaller parties.
No 'Hard Brexit'?
Currently, the political parties in the UK have only 50 days to design their campaigns and to win the affection of the voters. While Article 50 of the Lisbon Treaty has been already triggered, pro-EU parties might seek to appeal to those, who voted ‘No’ on the 23rd of June, by committing to revise Brexit process.
The Labor and Conservative Parties both decided to follow the will of the Britons, who voted to leave the EU.
At the same time, Liberal Democrats and the Green Party could improve their stances significantly in case they concentrate their campaigns on the pro-EU principle.
Changes in politics
Some of the UK citizens have might be disappointed by the political system in the UK. Indeed, UK has experienced a lot of turbulence in the recent months. Even though May is leading the polls now, anything is possible, considering the latest developments in the political world. The voters could change their minds and shift their preferences or have a defiance vote. In fact, Liberal Democrats have gained over 5,000 new members in just hours of May’s snap election announcement.
These movements can result in anything. The co-leaders of the Green Party stated that the had contacted the leader of the Labour party, Jeremy Corbyn, about the possibility to form a ‘progressive alliance.’ Experts believe that such coalition agreement could result in Conservative party being thrown away from the course for 5-year term.
Increased uncertainty across EU
The freshly scheduled UK Snap election risks to further intensify the turmoil around the Brexit negotiations. Moreover, Europe is already experiencing some disturbances due to the looming French and German elections.
This sudden decision also will add to the uncertainty among EU leaders. The European Council Donald Tusk has posted on his Twitter following UK Snap election announcement:
"It was (Alfred) Hitchcock, who directed Brexit: first an earthquake and the tension rises."
Yet, some of the experts believe that May’s decision will in no way change the plans of the bloc to continue with Brexit divorce talks.
Global markets turmoil
The last, but not the least of the UK snap election risks is the rise of the turmoil in markets. Global markets have been on the ride since the EU referendum in 2016.
The pound has spiked to 6.5 months high against the US dollar this Tuesday following May’s announcement. The common currency was trading at around $1.28 against the greenback. At the same time, FTSE 100 has dropped to nearly three months low.
An economist at UBS Wealth Management, Dean Turner, believe that the reaction was expected. Yet, he warned that the currency might be less predictable in the upcoming weeks. Also, he added:
"Market reaction we saw yesterday is probably well judged but we'll have to see what the next 50 days bring."
As for the long-term, Mr. Turner stated he expects the impact on the economy to be minimal.
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