A rundown of scenarios via Deutsche Bank on the 12 December election in the UK.

In the bullet points, the short term impact is first, followed by the medium-term.

Conservative majority between of greater than 30 seats:

  • Short-term: Moderately bullish, sterling to rally 1-3% initially
  • Medium-term: Sterling outlook contingent on government's approach to Brexit and transition period in H1 2020. A pivot on transition period extension would see further sterling gains (5-8%)

Conservative majority between of 0 (sic) - 30 seats:

  • Mostly priced, sterling to rally 1-2%

  • Sterling outlook contingent on government's approach to Brexit and transition period in H1 2020 but greater uncertainty about ability of government to u-turn on transition period

Conservative minority government with DUP or Brexit Party support

  • Bearish, sterling to fall 3-5% initially

  • Bearish on basis that chance of no deal Brexit by end of January Increases considerably

Conservative minority government with Liberal Democrat support

  • Bullish, sterling to rally 2-4% initially

  • Potentially very bullish if price of minority government support is second referendum, with eurosceptic Conservative MPs marginalised

Labour minority government with SNP, Liberal Democrat, other parties

  • Bearish sterling to fall 2-4% initially

  • Sterling to reverse initial sell-off and rally if second Brexit referendum delivered, fiscal policy becomes more expansionary and Labour party business policies are moderated

Labour minority government with SNP

  • Bearish sterling to fall 2-4% initially

  • Lower confidence that Labour business policies constrained, and prospect of second Scottish independence referendum offset positives from Brexit and fiscal stimulus. Neutral

Labour majority

  • Bearish sterling to fall 3-5% initially

  • Market will await execution of Labour Party policy platform on Brexit and business policies. Difficult to be structurally bearish given fiscal policy if BoE mandate unchanged