The Battle for Westminster

THE BATTLE rOR WESTMINSTER SAXO CAPITAL MARKETS Britain will head to the polls on May 7th for one of the most tightly contested elections in history. It's a dead heat between David Cameron's Conservatives and Ed Miliband's Labour with no party likely to win an outright majority. How will financial markets be affected as election day approaches? What do the polls tell us? Latest polls show Labour and the CURRENT UK POLLING AVERAGE Conservatives neck and neck with 33% Tris of the proportional vote each, 33 34 followed by UKIP in third with 14% of the vote. 30 25 20 15 || 15 10 Conservatives Labour Lib Dem UKIP Greens SOURCE: UK Polling Report, As of April 17th, 2015 Why is the election so close? 326 VOTES 350 Both Labour and the Conservatives are under pressure from smaller Westminster parties. Labour is expected to lose seats to the Scottish National Party (SNP), while UKIP is likely to win over some 300 250 disillusioned voters from the Tories. 200 150 100 A Conservatives Labour SNP UKIP What is the most likely outcome? According to forecasts, no single party CURRENT SHARE OF SEATS IN WESTMINSTER will win the 326 seats needed to seal an outright majority, with the Conservatives getting 284 seats against 278 for Labour. Polls suggest the Scottish nationals would become the third largest party in Westminster with 42 seats. Other 1 Greens 1 Conservatives Labour SNP Lib Dem UKIP 1 287 270 46 28 Plaid Cymru 4 SOURCE: Election Forecast What happened to FX in past elections? Historically, general elections have coincided with a bout of volatility in FX markets. Uncertainty surrounding the 2010 general election – when a coalition government was formed after five days of negotiations - led to a surge in GBPUSD volatility. Compare this to 2005 when a Labour majority ensured a much smoother outcome in FX markets. LABOUR MAJORITY: May 2005 COALITION GOVERNMENT: May 8700 17.000 8600 16.000 8500 8400 15.000 8300 14.000 8200 8100 13.000 8000 12.000 7900 7800 . 11.000 Feb Mar Apr May Jun Jul Feb Mar Apr May Jul SOURCE: Bloomberg Market Data What happened to stocks in past elections? The FTSE 250 is a good measure of confidence in Britain's businesses. After the 2005 election, traders showed faith in a stable government by buying up stocks in British companies. When there was uncertainty over who would govern the country in 2010, traders shied away from investing in British companies. LABOUR MAJORITY: May 2005 Election COALITION GOVERNMENT: May 2010 Election 7600 11000 7400 10500 7200 10000 7000 9500 6800 9000 6600 Feb Mar Apr May Jul Feb Mar Apr May Jun Jul SOURCE Bloomberg Market Data Twin uncertainties loom Markets are becoming increasingly anxious as the polls continue to indicate no clear winner. Nick Beecroft, Senior Markets Analyst at Saxo Bank, warns that sterling and UK equities could trade on the weak side until election day due to what he describes as twin uncertainties. go0 " The possibility of a hung parliament with a weak government or a Conservative coalition and the spectre of a departure from the EU will loom until election day." - Nick Beecroft SOURCE Trading Floor SOURCE: UK Polling Report, www.ukpollingreport.co.uik/uk-polling-report-average-2 Election Forecast, www.electionforecast.co.uk Bloomberg Market Data, www.bloomberg.com Bloomberg Market Data, www.bloomberg.com Trading Floor, https://www.tradingfloor.com/posts/twin-uncertainties-loom-large-following-uk-election-debate-4263382 This infographic has been produced for information purposes only and should not be considered as investment advice. Trading margin products can result in losses that exceed your initial deposit. Saxo Capital Markets UK Limited is a company authorised and regulated by the Financial Conduct Authority, registration Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.