What the Final Two Candidates Mean for UK Markets

  • master
  • 26.06.2019
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After Theresa May resigned on June 7, ten candidates put their hat into the ring to become the next UK Prime Minister. Now, after five rounds of voting from Tory MPs (the incumbent political party), it is now a two-horse race between Boris Johnson and Jeremy Hunt. Two candidates who have some major differences which are now creating some very interesting trading opportunities in UK markets.
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<a href=”https://admiralmarkets.com/analytics/traders-blog/tory-leadership-contest-uk-markets”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/7df5f6cca388800d375f764ea4a37824.jpeg” alt=”Trading FTSE 100 and GBPUSD” rel=”” style=””></a>
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In this article, we explain who the next Prime Minister could be and what he could mean for UK markets like the British pound and the FTSE 100 stock market index. Let’s get started!
</p><h2>UK Prime Minister: Boris Johnson vs Jeremy Hunt</h2><p>
Both candidates have similar educational backgrounds, being educated at private schools and both attending Oxford University. However, it is Jeremy Hunt, the current foreign secretary that has more experience in government and the candidate who has held more cabinet posts.
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The key difference between both candidates is their stance on Brexit – a divisive issue amongst the electorate. So where do the two candidates stand on Brexit?
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<li>Jeremy Hunt – Is open to leaving the EU with no deal but is not his preferred option. He wants to propose changes to the Irish backstop and send a new negotiating team to Brussels and while he thinks it is possible to get a deal done before 31 October, he has not ruled out an extension. </li>
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<li>Boris Johnson – Wants to leave on 31 October, with or without a deal and admits that a no-deal Brexit will cause ‘disruption’. He wants to remove the Irish backstop and says he would withhold the £39 billion ‘divorce’ payment the UK is due to give the EU until there is ‘greater clarity about the way forward’. </li>
</ul><h2>Who is the Favourite for the Top Job?</h2><p>
Currently, Boris Johnson is the favourite to win the backing of the Tory party to lead the country as the next Prime Minister. In all the rounds of voting, he has come out on top – despite recent newspaper headlines about his personal life.
</p><h2>UK Prime Minister Contest Timeline</h2><p>
Throughout early July, both candidates will tour the UK visiting potential voters within the Tory party – this event is called ‘hustings’. The aim is to build support from as many Tory party member voters as possible before the final round of voting on who will be the next Prime Minister.
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Around 8 July, Tory party members will receive their postal ballots. On 9 July, the two candidates are expected to go head-to-head in an ITV channel debate. The winner is likely to be announced the week beginning 22 July, most likely on the 23 July. On 25 July, a summer recess will begin in Parliament but most likely not for whoever the next UK Prime Minister will be.
</p><h2>What’s Next for UK Markets?</h2><p>
Both the British pound and FTSE 100 stock market index could experience large amounts of volatility, followed by long range-based periods as traders react to news announcement and then wait for the next announcement.
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This is why taking a bigger picture view can be more useful in such conditions. In fact, the bigger picture technical picture of both markets are looking quite interesting as we detail below:
</p><h3>Trading the FTSE 100</h3><p>
<a href=”https://admiralmarkets.com/analytics/traders-blog/tory-leadership-contest-uk-markets”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/b3e6a2a5dc64087962bacac146edcddc.png”></a>
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<em>Source: Admiral Markets </em><a href=”https://admiralmarkets.com/trading-platforms/metatrader-se”><em>MT5 Supreme Edtion</em></a><em>, </em><a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/ftse100″><em>FTSE 100</em></a><em>, Monthly – Data range: from Jun 1, 2005, to June 25, 2019, accessed on June 25, 2019, at 11:37 am BST. – Please note: Past performance is not a reliable indicator of future results.</em>
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In the monthly chart of the FTSE 100 above, it is clear to see that in the long-term the market has risen. However, even though the declines have been limited since the 2008 financial crash ended, they are still large enough to concern a trader using the lower timeframe such as the Daily chart.
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However, the long-term picture can help traders filter out some of the noise that develops on the lower timeframe and in this instance, traders may use the higher timeframe trend to identify long, or bullish, positions on the timeframes below.
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Currently, it seems as though buyers are still in control after the market bounced off historical support lines such as the trend line and horizontal line as drawn in the chart above.
</p><h3>Trading the GBP/USD Exchange Rate</h3><p>
One of the more popular British pound currency pairs to trade is the GBP/USD. The long-term chart is showing some interesting features:
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<a href=”https://admiralmarkets.com/analytics/traders-blog/tory-leadership-contest-uk-markets”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/remote/7d5423b3669447baf361b7f501134d11.png”></a>
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<em>Source: Admiral Markets MT5 Supreme Edition, </em><a href=”https://admiralmarkets.com/start-trading/contract-specifications/instrument/gbpusd”><em>GBPUSD</em></a><em>, Weekly – Data range: from Jun 21, 2015, to June 25, 2019, accessed on June 25, 2019, at 11:44 am BST. – Please note: Past performance is not a reliable indicator of future results.</em>
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In the weekly chart of GBP/USD above, it is clear to see the market trading in between a horizontal resistance line and horizontal support line. Traders will often use these as target levels, as well as entry levels.
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However, their first use is to help in identifying who is in control of the market. For example, for most of June price has failed to break below the lower horizontal support line, as it did before during November 2018. As buyers turned up here before, traders will use this as a sign to initiate long or buy positions on the lower timeframes.
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If this level breaks then it means no buyers were willing to step in and shows the weakness of the market going higher. Traders will then use this to look for short positions on a break of the horizontal support line.
</p><h2>Conclusion </h2><p>
Major political events in the UK are coming to an end in the next few months. This could be a historic time for UK markets. In the past, UK markets have resulted in large price movements after such events. Could it do so again? And if so, how will you be trading it?
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<a href=”https://admiralmarkets.com/start-trading”><a href=”https://admiralmarkets.com/analytics/traders-blog/tory-leadership-contest-uk-markets”><img style=”width:auto;” class=”img-responsive” src=”https://fxmedia.s3.amazonaws.com/articles/Forex_CTA-14.png” style=”” rel=”” alt=”Trade Forex”></a></a>
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