Will the Early Election Buy More Time to Hash Out Brexit?
Will the early election buy more time to hash out Brexit?
Theresa May today dropped a metaphorical bomb on the parliament and Britain as a whole, announcing a call for an early UK election to help soothe parliamentary splits over Brexit and make the process more unified. How will this affect the market? Let's take a look below.
What was Theresa May’s big announcement?
Theresa May today announced, outside of the famous 10 Downing Street, that an early election will be called on June 8th. This is in direct opposition to previous statements that she would not seek any kind of general UK election before that scheduled in 2020. Her reasoning, however, may well be sound. Standing as she does with a very fragile majority of only 17, Theresa May went on to explain that she wishes to seek a unified cabinet before Brexit negotiations begin in earnest. To push this announcement through, she will have to win over a 2/3 majority in the house today.
How will this affect Brexit?
Theresa May directly stated that, in the wake of the ‘Brexit’ decision to leave the EU made in a referendum last year, they country is united but Westminster is not. Her fears are that this will adversely affect any successful attempt to make Brexit work for the country. Her decision echoes calls by Tory party members for an early UK election, hoping to take advantage of their general lead over the Labor party in opinion polls. However, her announcement has also been welcomed by Jeremy Corbyn of the Labor party, who has stated it will ‘give the British people the chance to vote for a government that will put the interests of the majority first.’ Should the conservative party gain a stronger foothold in the wake of a UK election, it’s likely to drive a harder, cleaner ‘Brexit’, as well as take pressure away from the need to see it finished by 2019 on top of hosting a general election the following year.
What influence will this have on the market?
As any savvy market follower knows, Brexit has been a trigger point for market activity since the original referendum. Theresa May’s announcement of this hasty UK election will be no different. The GB pound has taken a strong hit in the months following the Brexit announcement, but this Bearish outlook seems to have been significantly affected by the shock call yesterday. Theresa May broke the news almost ten minutes earlier than planned, a move which initially sent the currency into freefall but which swiftly reversed as her announcement spread. At close of business, the pound sat at a 5 month high as a result. IN general, the markets seem to be treating the news as favorable.
What will Theresa May’s snap UK election announcement mean for Brexit long-term, however? We will have to wait and see.