Today, swathes of the country go to the polls for local council and mayoral elections and the market seems to be ignoring it
At any other time, UK local elections don't usually grab much market attention. This time I think the market needs to keep a closer watch as these ones come mere weeks before a general election.
The basis of a lot of these elections is not market moving, there's new mayoral elections and council seats up for grabs and some of the elections are due to changes in electoral boundaries. The actual ramifications for everyday England is not big but the market impact might be depending on the results.
This is the first test for Theresa May and the only actual event before the GE that shows real results and not just opinion polls. If you forget the mechanics of it all, and put it simply, the market is going to take note of how well or badly May does, and by proxy, how the other parties do.
If UK press headlines tonight and tomorrow scream that May has done well, expect the pound to rise on expectations that she'll nail the general election to the sort of level she wants to cement her and her governments grip in parliament (the reason behind the GE in the first place). If the headlines scream the opposite (and they will be the loudest headlines), that's going to shake some nerves about May doing well in the GE, and thus hurt the pound.
However, England might not even be where the big news will come from as all of Wales and Scotland will be voting in local polls.
Scotland could be another place where the market will trade the result. Sturgeons party has the bulk of seats in the Scottish parliament but out of 32 regions, there's 25 that aren't under overall control. This is a big opportunity for the Scots to tell Sturgeon what they think of a 2nd referendum, and indeed Brexit, by way of a protest vote away from the SNP (for a 2nd ref), and/or a move to the conservatives or Labour (an acceptance of Brexit), or the Lib Dems (another prod that they wanted to stay in the EU). It's unlikely we'll see any large scale swings from the SNP as many Scots would rather poke their eyes out than vote for the likes of the Conservatives. If we do, then we'll be getting a bold statement from the Scottish people.
Wales is also going to be a big battleground (more eye poking here). May's Conservatives hold not one seat on their own and all 22 regions are at the polls. With Labour in the current mess they are, they are very fearful of losing Wales to the Conservatives, something that hasn't happened since 1918.
There's many permutations to come out of this so it might be a tricky one for trading. I'll try and simplify it for the main outcomes;
May's Conservatives do really well across the board - GBP positive
May does reasonably well but we see votes heading for the minor parties like the Lib Dems and UKIP - GBP neutral to moderately negative
May has a mare and we see large protest votes or bigger moves to the remain parties like the Lib Dems, or to Labour, which increases the risk of May not getting what she wants in the GE - GBP negative (possibly bigly)
Current expectations for the GE are already siding with May doing well so any positive outcome from this event may mean we won't see a big upside move. The big price risk is if she does badly in the market's eyes.
If you want the real soup and nuts of these local elections, and what they mean, then please step over to visit ForexLive veteran Lilac, who invites you all to her loft where she's written about the elections in detail. (It has shamelessly been my reference for info for this post).
Whatever happens, it's going to be a long day for Theresa May.
May takes a break from campaigning (credit @JimmerUK)
