ANALYSIS: Newsquawk reaction to the UK election exit poll

Analysis details (22:14)

• Exit poll: Labour are set to win 410 seats for a 170-seat majority, Conservatives 131, Lib Dems 61, SNP 10, Reform 13, Greens 2


• Given the limited reaction seen in the GBP, it is safe to say that the exit poll is very much "as expected".


• In terms of the fallout from the election, the market will need to contemplate whether the party will use its political capital to embark on a set of policies which go beyond those listed in its manifesto. Furthermore, many commentators are of the view that  Labour's current public spending plans used in its costings are "implausible" and therefore something will need to give; either taxes will need to be raised or spending will need to be cut to an unrealistic level. However, this is not an issue which will be resolved tonight.


• On which, in terms of what should follow beyond this evening, Deutsche Bank notes that the subsequent milestones following the election would see the King's Speech around July 17th, a Spending Review over the course of the summer, ahead of an Autumn budget.


• Focus around the election will inevitably fall on the fiscal side of the equation. However, it is worth noting that developments in the monetary sphere may prove to be more influential for UK assets in the coming months. This comes as the BoE is yet to commence its rate cutting cycle due to the stickiness of services inflation. As such, the market is struggling to grapple with the starting and end points of the BoE's rate cutting cycle. It is also worth noting that members of the newly-elected government may opt to hold fire in announcing much in the way of fiscal measures until the BoE has embarked on its rate-cutting cycle in the hope that such a move will lower debt-servicing costs and provide more scope for government spending. Typically, monetary policy is expected to act as a counterbalance to fiscal policy, however, given the limited room for manoeuvre for any incoming government, this is unlikely to be the case this time around and as such, the election is not expected to alter the BoE's easing intentions. Also of note for the BoE could be a potential decision by the incoming government to introduce a two-tier reserve system at the BoE (as touted by Pantheon Macro); something which could raise GBP 5-10bln per year.


• In terms of what follows the exit poll, the first seats are set to be announced at 1130pm London time. However, the bulk of the results will likely not be available until 2am. Final results are expected between 6am and 7am.

04 Jul 2024 - 22:10- Fixed IncomeImportant- Source: Newsquawk