Latest news about Bitcoin and all cryptocurrencies. Your daily crypto news habit.
By Gavin Bambury
UK General Elections/EU Election
‘The EU Parliamentary elections have left a lot of uncertainty in European markets. For UK traders and private investors, these developments are crucial, as they affect cross-border investments and market dynamics. Increased volatility in European markets can present both risks and opportunities. Traders might find interesting prospects in currency pairs involving the Euro, while private investors need to stay informed about evolving policies that could impact their European equity holdings.’
As we approach the UK election, the environment is much calmer than in 2019. Still, with a 14-year stint of Tory leadership all-but-confirmed as coming to an end by the hands of Labour, there may be a level of political uncertainty the markets likely won’t like.
Private investors and traders may find more opportunities following the election frenzy. Monitoring any policy shifts from the incoming government will be important, although changes in monetary policy are expected to remain the primary drivers of the pound and UK indices/equities moving forward.'
Comparison to previous elections and impact on markets
'There are stark differences between the 2019 and 2024 elections. The 2019 election was marked by significant political uncertainty, driven largely by Brexit and the Scottish referendum, leading to extreme volatility. With Brexit resolved and the Scottish referendum currently subdued, we are unlikely to see similar levels of volatility this time, barring any unforeseen surprises.
In the seven days that followed the 2005 general election, declaring Tony Blair as victor, the pound fell versus the dollar by over 3.75%, so it will be particularly interesting to see the effect of a Labour majority, at least in the short term, on the Pound.
Drawing parallels to the 1997 election, where Labour secured a decisive victory, may offer valuable insights for today's market participants. Post-victory, the FTSE 100 experienced an impressive surge, rallying approximately 35% over the subsequent 12 months. Similarly, the FTSE 250 saw substantial gains of around 30% during the same period. This performance was driven by renewed investor confidence in the UK's economic stability and the pro-business policies implemented by the new government.’
Traders Perspective
'Foreign exchange market reactions are most pronounced during high election uncertainty. Given the current situation (expected Labour landslide victory), history suggests we should expect modest sterling gains in the coming weeks, with minimal reaction to the election outcome.
A Labour majority may largely be priced in by market participants given the polling trends leading up to the election. Market participants should be mindful of any significant deviation in the final results, as this may introduce additional market volatility, and unpredictable price movements.
The FTSE 100 hit all-time highs recently in May 2024; how positive or negative the markets see the outcome of this general election is key to UK equities. It is important to note that historically, a Labour government has been positive for domestic UK stocks. The FTSE 250 tends to outperform the FTSE 100 in the months following a Labour victory. Of course, past performance is not an indicator of future returns, but this is useful information that can serve as a guideline for private investors and retail traders.'
General advice to traders
'My general advice to traders would be to keep track of polls, not only considering the likely victor (which, unlike the last election in 2019, is much clearer and could already be ‘priced-in’ to some extent), but which party is likely to form the opposition, and their key policies.
Traders should proactively manage risk around election day, as the markets can move quickly in either direction. It’s also worth pointing out that the markets don’t like surprises; any shock result is likely to cause large price movements.'
Author Bio
Gavin Bambury is the OANDA CEO.
Disclaimer
The views and opinions expressed in this article are solely those of the authors and do not reflect the views of Bitcoin Insider. Every investment and trading move involves risk - this is especially true for cryptocurrencies given their volatility. We strongly advise our readers to conduct their own research when making a decision.