GBP, Conservative Party Elections

The political backdrop, candidates and expected policies for traders to watch around next month’s UK Conservative Party leadership election, who will be the UK’s next PM ?.

Traders generally overestimate the impact of political move’s on market, however, politicians often have to water down their proposals to get them passed through the rest of the government apparatus and the majority of factors that drive markets on a day to day basis sit well outside the realm of politics. The bigger influence on markets is from International trade, monitory policy, supply chains, business confidence and complex interactions of millions of traders across the globe.

The clearest difference between the two UK PM candidates revolves around the level of government spending, when it comes to economic policies. Truss is in favor of immediate tax cuts and more aggressive increases in defense spending, whereas Sunak has expressed a desire to get inflation under control first, then consider increasing the government deficit.

GBP/USD has been in a well-defined downtrend since the start of the year. After stalling out near its 50-day EMA earlier this month, GBP/USD has pulled back toward the 1.20 handle as we go to press, and it will take a confirmed break above the two-month high in the 1.23 area to erase the bearish trend.