General Election and Pound GBP

General Election and Pound GBP www.wheresmystop.
com
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GBP and 2010 UK General Election Analysis of

the Pound.
How has the Pound reacted to prior general elections?

Detailed Analysis of the Pounds reaction in the months leading up to and
after the UK’s past 7 elections. Including 1974’s Hung Parliament and
1992’s threat of a hung parliament.
Covering charts outcomes and possible scenarios for 2010.
Has the Pound already indicated the 2010 General Election outcome?
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rjc@wheresmystop.com All material ©2009
General Election and Pound GBP www.wheresmystop.com
GBP AND GENERAL ELECTION
CONTENTS
1-3 SCENARIOS AND PAST ELECTION
4 KEY FACTS AND REACTIONS
5 GBP AND 1979 ELECTION 2010
7 GBP AND 1992 THREAT OF HUNG PARLIAMENT
9 GBP AND 1997 POUND REACTION
11 GBP AND 2005 POUND REACTION
13 GBP 1974 HUNG PARLIAMENT AND 2010 POUND REACTION
14 2010 ELECTION SCENARIOS
15 2010 HUNG PARLIAMENT
16 2010 LABOUR WIN
17 2010 TORY WIN
18 SUMMARY
SCENARIOS AND PAST ELECTIONS
As we head closer and closer to the date of the UK 2010 General Election, this election could
prove the deciding factor for the Pound for years to come. Many forecasters and Pundits will tell
you a Tory win is a forgone conclusion. The tone of the win however has to be of landslide
proportions to avoid that peril of a hung parliament.
Wheresmystop Analyst RJC, takes an in-depth look at the perils ahead.
General Elections and GBP
Pound and Hung Parliaments
5 years ago a Labour Government under Tony Blair received a hammer blow at the polls. For the
first time in a modern generation a Government was re-elected to office having received fewer
votes in England than the opposing party. This time around under Gordon Brown a Prime
Minster many view 'un-elect', faces a daunting 2010 election battle not only to save his future but
a Labour future for the next 10 years.
Having already battled through a humiliating local by-election which saw Labour pushed into
third, a financial crisis some believe his own deregulation and policies en-flamed and an MP's
expenses scandal that still drags on, can Gordon save the day? Many Labour MP's will know that
their future hangs in the balance. Without any real alternative candidates to challenge for
leadership many have been forced to back Gordon Brown.
Yet it is doubtful that Labour have any real chance of returning to office, just as in 1979 and
1997, the British public is crying out for a change. However with a latest opinion polls
suggesting a Tory lead reduced to 8 points, is 326 seats possible? With electoral voting system as
it is in the UK, David Cameron not only has to win by the biggest landslide margin in modern
times but by some 1.75 to 2 million votes. A 10-13 point lead will suffice but an 8 point lead
risks a hung parliament. Historically Labour has always been stronger in the Polls leading up to
general elections, cometh the hour however it is a different matter. Polls suggesting Labour is
anywhere close to 27% 30% of the voters polled may prove flattering. For Labour voters it might
also be discouraging to be more concerned on how much we lose by rather than how much we
lead by. Will Sterling though react as poorly in the event of a Hung Parliament as many believe?
Hung Parliaments: Pound says No or does 1974 tell us different?
A hung parliament would be catastrophic long term for the pound and the British economy. The
uncertainty and power squabbling would not only raise real fears of rating agencies downgrade
of the UK's triple A status but also jeopardise an economy that has only just emerged from the
longest recession in living memory. All the Bank of England Quantitative Easing and financial
crisis fire fighting will be undone. However is this true? The last Hung Parliament of Feb 1974,
which forced another general election in October of that year, Sterling shrugged off indifferently
with a 2 month rally. It wasn't until following years when the Labour Government was forced
into borrowing from the IMF to avoid Bankruptcy did we see Sterling crumble. In 2010, long
term it is possible the only winners from a hung parliament politically will be the Liberal party.
Key Facts
In 1979 following on from 'The Winter of Discontent' Margaret Thatcher swept the
Tories to power with over 43% of the electoral vote. With the UK in the grip of a recession
and interest rates above the 10% norm of the time, Sterling rallied in the following months.
The last major notable post election Sterling rally, of 3000 points.
In the last 5 out 7 elections results, only in 1983 and 2005 has Sterling not seen a temporary
relief rally in the following 8 weeks of result.
In the last 5 out 7 elections the Pound has rallied in the 6 months leading up to election.
Will 2010 draw parallels to the hung parliament of 1974? As Polls flatter to deceive, Tories
need to lead and win by over 42%. Maintaining a 10 to 11 point margin over Labour is
crucial to obtaining the biggest landslide win in modern times. The UK is the last nation of
the G7 nations to emerge from recession, the scale of the victory will be more important to
the economy than just who wins.
In the 2009 UK Local By-Elections Labour suffered a humiliating defeat to the extent that
overall voting pushed them into third. Largely due to voters protesting against Labour
policy, MP's Expenses Scandals and the worst economic recession since records began. Is
Gordon Brown betting on a hung parliament?
Liberal Parties 2005 election gains mirrors that of 1992 and 1974, in the following 1997
and 1979 elections we saw a landslide victory for the opposition.
GBP AND 1979 ELECTION
• WINTER OF DISCONTENT
• CRIPPLING BUDGET DEFICIT
• UNPOPULAR LEADERSHIP
• TORY WIN 43% 336 SEATS
Cons 43% vote Up 8%

Lab 36% vote Down 2%
Lib 13% vote Down 4.5%
What will the Election mean to the Pound ?
Effect of General Election and Pound GBP
The 2010 General Election for the UK is the most important in over 30 years. Since
Margaret Thatcher settled the political upheavel of the 70s in 1979, there have 6 following
elections, 4 of which we look at in greater detail and the reaction of Sterling (1979, 1992,
1997, 2005). How does Sterling react and can any comparisons be drawn from the hung
parliament of 1974?
1979 Election and Pound
In 1979 many factors present then are present now. Having survived what would later be known
as the Winter of Discontent, a deeply unpopular Labour Government, struggling with its budget
deficit, had been forced cap in hand to the IMF for lending some two years before. With high
unemployment, interest rates at 10%, taxes on higher earners at over 80%, England was
psychologically bankrupt. A vote of no confidence in the Government forced an early election
and end to the unofficial Liberal coalition. Parallels can be drawn as Labour are now 10 points
behind the Conservatives in the Polls. Have a deeply unpopular Prime Minister with the public,
public debt that will soon rise to 60% of GDP, high unemployment and have thrown billions into
the economy in an aid to prevent a depression. Could another change of government see a
psychological Sterling rally after the 2010 election similar to that of 1979?
1979 General Election and affect on Pound.
Sterling had climbed back to previous 1978s highs of 2.09 in the 6 months prior to the 1979
election on certainty that a change of Government was on hand.
When it was clear not only had Margaret Thatcher won but had a clear majority, Cable
rallied in the following 6 weeks to 2.34. The largest and last notable post Pound election
rally.
1979 GENERAL ELECTION GBP/USD 6 MONTHS BEFORE 6 MONTHS AFTER
GBP AND 1992 GENERAL ELECTION
• THREAT OF A HUNG PARLIAMENT

• DEEP RECESSION
• SMALL LEAD FOR LABOUR IN
POLLS
• STEADY POUND DECLINE POST
ELECTION
• TORY WIN 41 % OF VOTE 336 SEATS
Cons 41% vote Down 0.3%

Lab 34+% vote Up 3.5+%
Lib 17+% vote Down 4+%
1992 General Election and Pound
In both 1983 and 1987 Margaret Thatcher had led the Tories to resounding wins despite enduring
a recession and almost 11% unemployment in the early 80's. In 1992 Britain was heading into
another recession fueled by a property spiral of epic proportions. Prime Minister John Major in
office less than two years, faced defeat at the polls or a realistic chance the result would force a
hung parliament. Labour having led in the Polls under Neil Kinnock by a small margin, appeared
guaranteed to win office by a small majority. Cometh the hour though voters turned away and
Labour won shy of 34% of the vote up only 3% on 1987 General Election. It was a major coup
for the Tories.
The Pound having declined heavily in the 3 months running up to the election, reversed 3 weeks
out and rallied strongly until September 16th, better known as Black Wednesday.
There are many differences between 1992 and 2010's threat of a hung parliament. One is the
Polled lead of the Tories, interest rates are at historic lows now, versus 9.8% of 1992. However
Cable is reacting in a similar manner, a steady decline. Only twice out of the last 7 elections has
the Pound failed to rally in the 6 months leading into an election 1992 and 1997. When the
outcome is unsure it appears to reflect in Cable.
1992 UK General Election and affect on Pound.
3 weeks out from the election as Labours lead in the polls stayed steady, the Pound started
to slowly reverse. With the Tory win of 336 votes, Cable promptly accelerated and rallied
hard until Septembers Black Wednesday.
1992 GBP/USD 6 MONTHS LEADING 1992 GBP/USD 6 MONTHS AFTER
In the last 5 out of 7 elections the Pound has declined only notably once (1992) in
the months leading into the election. In 1992 with interest rates having been steady at 9.8%
an economy that was in strong recession, a real change of office was on the cards. More so
the threat of hung parliament was distinct possibility and played nervously on the Pound.
• NEW LABOUR
• UNPOPULAR ELECT
• STRONG PRE - POLL LABOUR LEAD
• PYSCHOLOGICAL CHANGE
• ASIA
• LABOUR WIN 43% 418 SEATS
Lab 43+% vote Up 8+%

Cons 30+% vote Down 11%
Lib 16+% vote Down 1+%
Just as 1979 heralded a new change of Government, 1997 was a defining moment in Labours
modern political history. Tony Blair and 'New Labour' swept to power removing 18 years of
Tory power. The Tories were suffering continuous allegations of corruption and so called 'sleaze'
and publicly were unpopular. The country psychologically wanted a change and Tony Blair's
charismatic leadership and successful manoeuvring of Labour from far left policy was just the
ticket. Having a healthy 10 point lead in the Polls going into the election, it was a case of how
much would Labour win by.
The Pound seemed nervous of the thought of a change of Government especially on what new
policies Labour would herald. With interest rates steady at 6.25% and an economy in good
shape, Cable 6 months leading into the election started to decline but 3 months out was caught
within a tight 1000 point range.
This could have been reflective of not only pre-Labour wedding nerves, but also to the
developing global crisis in Asia that was just starting to unfold. 6 months after the election that
range continued.
The Conservatives were resoundingly beaten in 1997 losing 178 seats, Labour romped home
with 43% of the vote nearly 4 million votes more than Tories. In 2010 David Cameron needs a
similar swing to avoid any thoughts of hung parliaments.

Sterling had started to decline in similar fashion to 1992 but undecided 3 months prior to the
General Election reversed course and started to climb. The immediate aftermath was a brief
relief rally but not of any note. Global events especially in Asia were starting to fray investors
nerves and Cable remained caught within tight range.
1997 UK GENERAL ELECTION GBP/USD 6 MONTHS LEADING 6 MONTHS AFTER
• VOTERS PROTEST ON WAR

• LOWEST WINNING VOTE IN HISTORY
• ONLY THE SECOND POST ELECTION
POUND DECLINE IN LAST 7 ELECTIONS
• LABOUR WIN 35% 356 SEATS
Lab 35+% vote Down 5+%

Cons 32+% vote Flat
Lib 22+% vote Up 3.5+%
In 2005 Labour headed into the Polls with not so much a disenchanted Public but one nolonger
in full trusting of Tony Blair leadership. A deeply unpopular war in Iraq led many voters to
protest vote. Labour won just 35% of the vote a record in its own right.
Running into the election the Pound has shown no discernible direction, ranging against the
dollar between 1.95 and 1.85. With Interest rates steady at 4.5% and an economy ticking along
there was little thought of a major move. In the immediate aftermath however cable tumbled.
For only the second time in 7 elections, the last being 1983, the Pound immediately sold off.
Labours poor showing caught many by surprise. The voters indifference and protest at Labour
policy, mainly on Iraq, caused extreme nervousness. The Pound dropped 1800 points in the
following 8 weeks, the decline only halting just before the London tube attack on 7/7.
Labours poor showing not only led the way to even poorer Local By Election results in later
years, but could ultimately lead to disappointment for many Labour voters in 2010.
Of note the Liberal Parties 2005 election gains mirrors that of 1992 and 1974, in the following
1997 and 1979 elections we saw a landslide victory for the opposition. Will history repeat itself?
2005 General Election and affect on Pound.
Sterling had climbed in the final 4 weeks into the election as in other elections. Once the
date is announced it seems some uncertainty is removed. In the 6 months prior there had
been equal dips and troughs within a range of 1.94 and 1.85 on the dollar. However on
release of result, both Labours poor showing and voters no vote protest, Cable plummeted
2000 points over the next 8 weeks. Only the second post Cable fall in 7 elections.
2005 UK GENERAL ELECTION GBP/USD 6 MONTHS BEFORE 6 MONTHS AFTER
• GBP HUNG PARLIAMENTS

• UK ELECTION SCENARIOS
• 1974 COMPARISONS
• PAST GENERAL ELECTIONS
General Election and Pound GBP and Results Forecast: Four outcomes to the UK 2010
General Election.
In an interesting move Gordon Brown has decided to push forward a political referendum on the
Alternative Vote before the Easter recess. Some would say Mr Brown is both trying to appease
the Liberals in case of a hung parliament and probably aware than a Labour loss at the election
could sideline them for another 10 years. In reality the Pound is in for a rough time, as even with
a Labour win, will MP's continue to back Gordon Brown or seek alternative leadership?
1974 HUNG PARLIAMENT AND GBP
In 1974 Edward Heath led a battle weary Tory Government into the election losing by 4 votes
and the UK’s first hung parliament in over 20 years. Subsequently Howard Wilson's Labour took
office, but with political stalemate and lack of clear stability another General Election ensued in
October of that year. Labour won taking 319 of the 623 seats only just winning a majority.
• FEB LAB WIN 301 TO TORY 297

SEATS
• OCT LAB WIN 319
• POUND RESILIENT
1974 General Election and Pound.
Sterling notably declined from 2.50 to 2.20 in the 6 months leading to the Feb election but 4
weeks out in usual pattern, reversed and started to climb. Indeed Sterling continued to
climb throughout the hung parliament result and going into the October re-election. It
wasn't until April 1975 some 6 months after the Oct Election that the Pound tumbled as
economics took centre stage. Infact Sterling seems positively harden to Elections.
For charts visit www.wheresmystop.com .
1974 GBP/USD 6 MONTHS BEFORE FEB AND 6 MONTHS AFTER OCT ELECTIONS
GBP AND 2010 HUNG PARLIAMENT
2010 HUNG PARLIAMENT and POUND
May 6th Election? In 2010 the Pound is on the back foot and the chart is not too dissimilar to that
of 1974's in that the Pound, has started to weaken some 6 months out ahead of a hypothetical
May Election.
Some of this can be contributed to the Global economy and current Sovereign Debt fears. If the
Pound continues to fall to 1.50 and below, when the election date is announced we could see a
temporary bounce, a pattern that has developed in the final 3-4 weeks preceding many elections.
Given Sterling's historical robustness you would have to argue that a Hung parliament isn't the be
all and end all. A run on the Pound looks unlikely. The real threat to the political uncertainty
would be on fiscal policy and reigning in the Public Spending. Britain's Triple AAA rating is
key. It is hard to imagine any of the Ratings Agencies being brave enough to downgrade the
UK's rating, yet fears that started with Greece, now Portugal and Spain who's next?
LABOUR LIBERAL COALITION
If Labour has won more seats than the Tories then a deal with the Liberals is on the table. It is
highly unlikely that the Liberals would agree to a 1977 like unofficial coalition agreement.
The difference in both parties policy does not bode well for the Pound, however much of this
threat would already be priced in. It is only in the longer term, as eventual differences stalemate
any real forward progress politically and fiscally is damage to the Pound likely. The Liberals
would not snub the chance to get back onto the stage regardless of the sabre rattling before
election to say contrary. The Tories on the other hand would probably take a chance on another
election. Indeed if they scrape through with a slender lead another election 6 months from May is
a real possibility. Again it is hard to see pressure on Sterling.
2010 SIMILAR POST REACTION TO 1974?
GBP 2010 LABOUR WIN

LABOUR WIN
LEADERSHIP CHALLENGE?
POUND BLUES
2010 Labour Win
As much as we can't see a Labour win, if Mr Brown clings on to lead Labour for another 4 years
other problems for the Pound develop, namely Leadership. If Gordon Brown wins the temporary
relief in the Pound after the election will be replaced with a Labour leadership challenge. The
support of the Prime Minister with the election out of way will diminish, the question is, is there
anyone there to challenge him? This will affect the Pound more notably that any Hung
Parliament.
As pointed out in our 2010 analysis Labours winning margin must be enough to also suffer the
Labour rebels in the party. There are many negatives for Labour, even more so with the Iraq
enquiry continuing to cut at old wounds. Now with the prosecution of 3 labour MPs due to start
in May for alleged false accounting of MP expenses, Labour is suffering similar bad publicity to
that of Tories in 1997. Labour must be counting on a a low turnout at the Polls and a Hung
parliament in their favour.
2010 GBP AND TORY WIN

LARGEST LANDSLIDE IN MODERN
TIMES
1979 STYLE REACTION?
WILL ECONOMY SCUPPER POUND

RELIEF?
2010 Tory Win
2010 beckons a new change of Government, but can the Tories pull off a landslide win? Labour
are bruised from an expenses scandal and a recession that history will write about for many
decades to come.
It is possible that 2010 will prove to be a 1997 moment for the Tory party. The psychological
boost to Sterling we believe could be similar to that of 1979. A psychological fresh start, strong
commitment to economic policy and reigning in Public Deficit might be the tonic that Sterling
needs. The biggest challenges are not whether the Conservatives are able or whether England
and the World has avoided a 'double dip' recession, it is whether the vote has swung 8% in their
favour. A Hung parliament with a Conservative lead is just as likely as a Tory win.
1979 STYLE REACTION TO 2010

TORY MAJORITY WIN?
Pound and Election Reactions
The Pound has shown through many elections that several characteristics and reoccurring
patterns develop. The tendency to rally once the election date is released is prominent, as is the
statistics for a temporary relief rally in the 4-8 weeks after election result. It is notable though
that as in the 1992 threat of a hung parliament and 1997s change of Government the Pound fell
before election date. If the 2010 chart continues to mirror those events and that of 1974, not only
are investors expecting a hung parliament they are pricing it in. In the aftermath however, once
the outcome is decided, hung parliament or not Sterling shows to be consistently resilient, any
talk of a run on the pound is a touch premature.
For more access to any of our articles please visit www.wheresmystop.com or email
rjc@wheresmystop.com
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General Election and Pound GBP www.wheresmystop.

GBP and 2010 UK General Election Analysis of

How has the Pound reacted to prior general elections?

GBP AND GENERAL ELECTION

1-3 SCENARIOS AND PAST ELECTION

4 KEY FACTS AND REACTIONS

5 GBP AND 1979 ELECTION 2010

7 GBP AND 1992 THREAT OF HUNG PARLIAMENT

9 GBP AND 1997 POUND REACTION

11 GBP AND 2005 POUND REACTION

13 GBP 1974 HUNG PARLIAMENT AND 2010 POUND REACTION

14 2010 ELECTION SCENARIOS

15 2010 HUNG PARLIAMENT

16 2010 LABOUR WIN

17 2010 TORY WIN

SCENARIOS AND PAST ELECTIONS

Wheresmystop Analyst RJC, takes an in-depth look at the perils ahead.

General Elections and GBP

Pound and Hung Parliaments

Hung Parliaments: Pound says No or does 1974 tell us different?

GBP AND 1979 ELECTION

Cons 43% vote Up 8%

What will the Election mean to the Pound ?

Effect of General Election and Pound GBP

1979 Election and Pound

1979 General Election and affect on Pound.

1979 GENERAL ELECTION GBP/USD 6 MONTHS BEFORE 6 MONTHS AFTER

GBP AND 1992 GENERAL ELECTION

• THREAT OF A HUNG PARLIAMENT

Cons 41% vote Down 0.3%

1992 General Election and Pound

1992 UK General Election and affect on Pound.

1992 GBP/USD 6 MONTHS LEADING 1992 GBP/USD 6 MONTHS AFTER

1992 UK General Election and affect on Pound.

GBP AND 1997 GENERAL ELECTION

Lab 43+% vote Up 8+%

1997 Election and Pound

1997 UK General Election and affect on Pound.

1997 UK GENERAL ELECTION GBP/USD 6 MONTHS LEADING 6 MONTHS AFTER

GBP AND 2005 GENERAL ELECTION

• VOTERS PROTEST ON WAR

Lab 35+% vote Down 5+%

2005 Election and Pound

2005 General Election and affect on Pound.

2005 UK GENERAL ELECTION GBP/USD 6 MONTHS BEFORE 6 MONTHS AFTER

GBP AND 2010 GENERAL ELECTION

• GBP HUNG PARLIAMENTS

1974 HUNG PARLIAMENT AND GBP

• FEB LAB WIN 301 TO TORY 297

1974 General Election and Pound.

GBP AND 2010 HUNG PARLIAMENT

2010 HUNG PARLIAMENT and POUND

LABOUR LIBERAL COALITION

2010 SIMILAR POST REACTION TO 1974?

GBP 2010 LABOUR WIN

2010 Labour Win

2010 GBP AND TORY WIN

1979 STYLE REACTION?

WILL ECONOMY SCUPPER POUND

2010 Tory Win

1979 STYLE REACTION TO 2010

Pound and Election Reactions

Forex Secrets What they don’t tell you