GBP/TRY Slips on UK General Election Uncertainty

After weeks of markets predicting a clean UK general election win for the Conservatives, their lead in the polls halved over the weekend, which left GBP/TRY trading lower.

Pound (GBP) Drops as UK Election Uncertainty Worsens

Despite last week’s strong UK data, investors have remained concerned about Britain’s 2017 economic outlook and low bets of any tighter monetary policy from the Bank of England (BoE).

As a result, Sterling was easily weakened by rising uncertainty on Monday as investors reacted to news that UK Prime Minister Theresa May’s Conservative party’s poll lead had essentially halved in a week.

The gap between the Tories and the main opposition party, Labour, had dropped from around 20 points to 10. Some pollsters have the Conservative lead as low as 9 points this week.

This drop in Conservative popularity is being attributed to a social care plan from the Conservative manifesto, particularly a proposal to have UK pensioners pay for healthcare unless they have assets totalling below £100k.

Theresa May has already U-turned somewhat on this plan due to wide criticism and has indicated there will be a cap on how much elderly citizens will need to pay.

With Brexit negotiations having already begun and the full process beginning soon, this rise in uncertainty about the future of Britain’s government has made investors more hesitant to buy the Pound.

Turkish Lira (TRY) Benefits from Domestic Data, Erdogan Election

While low-influence compared to UK news and the Pound’s movement, the Turkish Lira (TRY) has seen slightly higher demand over the last week due to domestic news.

Last week saw the publication of Turkish unemployment data from February and May consumer confidence, both of which marked improvements over previous figures.

Monday’s news that the Turkish government’s debt had worsened from TRY793.4b to TRY794.5b didn’t have much effect on the Turkish currency.

The Lira has also been bolstered slightly by news that Turkish President Recep Tayyip Erdogan had become the first president to lead a party since 1950.

After sweeping changes were made to Turkey’s constitution in April, Erdogan was allowed to be a member of the ruling party, AKP, for the first time since he became President.

GBP/TRY Forecast: UK Growth Stats Due Thursday

Any changes in UK general election polling is likely to have an effect on the Pound to Turkish Lira exchange rate up until the election itself on the 8
of June.

If the polling gap between the Tories and Labour continues tightening, the Pound will keep weakening as uncertainty rises. If the Conservatives strengthen their lead once again the Pound could see some relief gains.

This week’s most influential dataset will be Thursday’s UK Gross Domestic Product (GDP) projections. If these impress the Pound is more likely to recover its recent losses.

Turkish data is likely to influence TRY movement this week. May business confidence data and capacity utilisation data will be published on Tuesday, followed by economic confidence from May on Friday.

Josh Jeffery

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