The UK is a “beacon of stability” for the market

Overall, the UK election campaign was not a major focus for investors.

The British pound remained in a fairly narrow range and rose to a high level against the euro for the first time in over 2 years. Gilt also showed little action, which suggests that there is almost no risk premium attached to a change of government.

This may be because opinion polls have consistently led the Labor Party by about 20 points, and the latest Yugav poll suggests that the Labor Party is gaining the largest majority since 1832, when the Great Reform Law was enacted.

The Labor Party argues that it will become a true pro-business political party by promising stability. Also, they have pledged to stick to the same fiscal rules as the Conservative Party, which suggests that there is almost no risk of financial collapse.

A Deutsche Bank analyst wrote, “The UK election appears to have lowered market priorities due to the concentration of votes in France and the United States.”

“Considering that opinion polls hardly moved during the election campaign, there is a high possibility that the Labor Party has already factored in the majority.

FX analyst Francesco Pesore of Dutch bank ING said, “It's difficult to identify the pound's big risk for today's vote.”

Interest is even lower in other countries. Mark Dowding, Blue Bay CIO of RBC Blue Bay Asset Management, said, “The election to be held on 7/4 seems to be as exciting as the soccer team.”

The predictable British election is in contrast to the ongoing French election and the upcoming presidential election across the Atlantic.

France's centre-wing and left-wing political parties are doing their utmost to prevent Marine Le Pen's National Coalition from securing a majority in parliamentary elections as internal negotiations over Joe Biden's future continue.

The market seems to like Britain's relatively stable politics. According to a survey conducted by Bank of America in June, fund managers now answered that the UK is the most preferred European stock market.

Capital Economics analysts say UK assets may benefit from political and financial stability, particularly in favor of France and potentially the US.

Alex Carr, assistant economist at Capital Economics, said, “It's strange to say this, but the UK may be entering a period where it is an indicator of political and economic stability.”