The EURGBP fell this Wednesday as broad-based GBP-buying took hold in the forex market, ahead of the much-anticipated YouGov MRP poll. The YouGov MRP (multilevel regression and post-stratification) poll for the December 12 election will first hit the newswires at 2200 GMT, courtesy of The Times. This poll harnesses the numbers from YouGov’s polls over the past week and posts a projected outcome on a seat-by-seat basis, which increases its reliability.
What Would EURGBP Traders Be Looking Out For?
Recent polls conducted by YouGov for The Times and other media have shown that the Labour Party is steadily erasing the lead of the Conservative Party. The numbers for the Liberal Democrats and the Brexit Party have been somewhat stagnant, effectively turning the UK election into a 2-horse race.
Traders on the EURGBP would want to know if the Tory Party’s lead has been cut even further. A similar situation was seen in 2017 when the Labour Party cut the poll lead of the Tory Party from 18 points to just 2 a few days before the election, ultimately resulting in an election outcome that did not provide the parliamentary majority that Theresa May sought at the time.
The big question is: would the Labour Party be able to shrink the gap between them and the Tory Party even further, thus raising the likelihood of a hung parliament? Narrowing of this gap would raise the odds of a hung parliament, which could lead to a no-deal Brexit. This situation could be interpreted as being GBP-negative, which would lead to EURGBP buying.
On the flip side, a widening of the gap between the Tories and the Labour Party would raise the odds of a Conservative sweep at the UK election, providing the necessary parliamentary majority that could provide an easier pathway to an orderly Brexit. This situation could then be interpreted as GBP-positive, leading to a further selloff in the EURGBP.
The EURGBP has found support at the 0.8542 S1 pivot after today’s selloff. Further support lies at 0.8530, where previous lows of November 18 and 25 are found. A break of these support areas in sequential fashion from a GBP-positive YouGov poll outcome targets 0.8456 (previous weekly lows of January 1 and May 14, both in 2017).
A GBP-negative poll could lead to increased bids on the EURGBP, targeting a break of 0.8605. If this is successful, then a run to the next resistance target at 0.8679 cannot be ruled out. However, a short-term resistance area at 0.8584 (intraday highs of November 25 and 27) could be a pitstop on the way up.More content