- Summary:
- UK's Dec 12 election alliances being forged as Farage announces he won't field candidates against current Tory Party MPs, sending EURGBP sharply lower.
The EURGBP has fallen steeply on reports that Pro-Brexit politician and member of the EU Parliament Nigel Farage will not field candidates against Members of Parliament from the Tory Party. Conservative MPs hold 317 seats from the last election.
The implication of this announcement is that solidifies the Tory Party’s base in the House of Commons, allowing for a solid challenge to Labour-held seats. A Tory majority in the House of Commons helps the UK PM push through his Brexit agenda through parliament, which is expected to be good for the GBP.
However, not everyone is totally convinced that the recent announcement would produce any fundamental change in the structure of parliament. This group which also features Chris Curtis of YouGov, believes that a more significant change which directly threatens Labour-held seats would be more impactful.
Technical Outlook for EURGBP
The EURGBP has broken out of the short term symmetrical triangle to the downside. The latest price move was strong enough to push through the S1 and S2 pivot levels and is now challenging the S3 pivot (0.8572) to the downside.
Medium-term, the next support lies at 0.8501. Price needs to close below the 0.8572 S3 pivot support in a decisive manner for the pathway to 0.8501 to be established. This price move would benefit from an outlook that sees this announcement as being fundamentally significant for a Tory election victory.
Failure to close below 0.8572 could lead to a retest of the S2 pivot on the day at 0.8585, or previous multi-day lows at 0.8599. This move could happen if markets digest the announcement and decide that it would not have much of an impact on the December 12 election outcome. In this case, the current price drop would be seen as a knee-jerk response, with potential for upside retracement.