`Red` Ed Milliband resigns as Labour leader.
Ed Balls counts himself out as next Labour leader.
David Milliband `reluctantly` puts his name in the frame for Labour leadership
For the Conservatives, it is essential that they keep `Red Ed` in place for the next 18 months or so until the election in May 2015 – and that is a very tricky thing to do. Of course they need to criticise him, but they also need to keep him around by conceding a few small victories until it is too close to the election for a replacement. Of the Milliband of Brothers, the widely held view is that the dice came down on the wrong side, and the Conservatives think that a team of Ed Milliband and Ed Balls are very beatable – a clear and often quoted case of two Eds being worse than one.
The economic outlook is good. The BOE will be keeping interest rates historically low; £ is stable and not an issue; the private sector is slowly expanding and hiring, and Europe has taken a step back from the edge. The market will like a majority Conservative government, and at the moment, that is the likeliest outcome in May 2015. The Tories understand that the next election will be won on the promise of higher living standards, and the objective will be to make this recovery real, so that people feel better off. Perhaps the joker in the pack – and there always is one – lies in Europe. The UK desperately needs a stable European outlook, and for that to be probable, we really need to see the peripheral countries sharing in some of the German success.
For £/$, the exchange rate has basically mean-reverted somewhere around 1.56 over the last 3 years. Should this stability disappear, the Government would prefer a lower rather than a higher rate, but in exchange rate terms, Governments rarely get what they want. Small fluctuations (in historic terms) don`t matter, and neutrality can be broadly defined around 1.40/1.65.
Euro/£ has been choppier but subject again to a mean-reversion around the .84 area, and should a breakout occur then again the preference would be for a more competitive rate of exchange rather than a firmer number.
I know that to this mainly retail market, to make these comments about exchange rates is extraordinary, when the focus is more on the next 20 pips rather than the next 20 big figs ! The fact is, that one persons trend is another`s noise – and a knowledge of the `other side` is never irrelevant!
So to sum up, the Conservatives probably wish that the Fixed Parliament Act of 2011 was never passed, because I have no doubt that if things look as they do now, an early election in Spring 2014 would have taken place. Labour look in trouble, and on their current course will lose. They know that too, so expect a rough ride for Dave`s little bro !!