UK Prime Minister
In the United Kingdom, general elections are typically held every five years. The next general election is due by January 2025, as the last one was held on December 12, 2019. Rishi Sunak called for an early general election on July 4, 2024, primarily due to political and strategic reasons. His decision aimed to consolidate his party's position and gain a renewed mandate amidst ongoing economic challenges and political controversies.
• Present - Rishi Sunak
• Resigned in 2022 - Liz Truss (Economic instability)
• Resigned in 2022 - Boris Johnson (Party scandals)
• Resigned in 2019 - Theresa May (Brexit deadlock)
• Resigned in 2016 - David Cameron (Brexit referendum)
• Full term in 2010 - Gordon Brown
Economic Instability
All four of Sunak’s predecessors resigned due to Brexit and economic instability. Notably, the long term UK bond, known as Gilt, collapsed in 2022 and remains under pressure today. Long-term government bonds are often seen as indicators of investor confidence in a country's economy and its future prospects. When investors are confident about the stability and growth of a country’s economy, they are more likely to invest in long-term bonds issued by that country. Conversely, if investors are uncertain about the economic outlook, they might demand higher yields for long-term bonds or avoid them altogether.
Source: TradingView
UK’s Inflation Still High
Though the UK’s Consumer Price Index (CPI) has declined to 2% from 11.1%, its Owner Occupiers’ Housing Cost is rising to its highest at 6.7% since July 1992. The Bank of England's base rate has remained at its recent high of 5.25% since August 2023.
UK’s Prime Minister’s Challenge The resignations of former prime ministers have been linked to economic stability and fiscal spending, including Brexit. Some Britons were dissatisfied with the financial contributions the UK made to the EU budget, believing the money could be better spent domestically rather than being used to support other EU member states.
As the UK’s GDP flattens, bonds remain under pressure, inflation is uncertain, and interest rates are likely to stay higher for longer, Sunak or the incoming prime minister’s job is one of the most challenging in modern UK history.
Market forecast:
• Currency
Since the June 2016 referendum, both GBP/USD and EUR/GBP currency pairs have been ranging without a clear trend, indicating that the US and EU are not in significantly better shape than the UK.
Trading strategy:
Trade within this broad range.
• UK100
There is a divergence between the stock market and inflation. The stock market's bullishness is attributed to the residual hot money or Quantitative Easing in response to the economic challenges posed during the COVID-19 pandemic. Whenever there is a divergence, trade cautiously as the market has met its first resistance.
Trading strategy:
I will attempt to sell on strength with a stop loss above the all-time high. If the price crosses above the recent all-time high, I will resume buying on dips, targeting Resistance 2.
Source: TradingView
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