The UK elections environment has seen a dramatic twist this week.
Nigel Farage, the leader of the Brexit party, announced that the party will not field candidates in Conservative constituencies and will only oppose those held by Labour or other parties.
There has been a great deal of speculation over the recent weeks as to whether Farage would stand against the Tories. This would have potentially diluted the vote enough to stop the Conservatives from gaining a majority.
However, Farage’s announcement that his party will not run against 317 Conservative-held seats marks a stark change in course from his recent pledge to fight for 600 government seats.
Farage Signals a Retreat
Speaking at an election rally in Hartlepool, Farage told his supporters:
“I will tell you now exactly what we are going to do. The Brexit Party will not contest the 317 seats the Conservatives won at the last election… But what we will do is concentrate our total effort into all the seats that are held by the Labour Party, who have completely broken their manifesto pledge in 2017 to respect the result of the referendum. And we will also take on the rest of the Remainer parties. We will stand up and we will fight them all.”
Farage to Block Lib Dem Elections
Farage also told his supporters:
“I have tried over the course of the last few months to build a Leave alliance … But that effectively has come to nought. It’s been very, very difficult.”
Farage explained that private polling indicated Brexit candidates “from SW London to Hampshire and right out through a western corridor to Land’s End” would split the Tory vote and result in a “large number of Liberal Democrat gains”.
Johnsons Welcomes Farage Move
The news was welcomed by the government, which now has a far higher chance of holding onto the seats won at the last election.
Commenting on the news, Johnson said he was pleased with Farage’s “recognition that another gridlocked hung parliament is the greatest threat to getting Brexit done”.
“If we have another hung parliament it would lead to two more chaotic referendums next year.”
Striking an optimistic note, Johnson said:
“The Conservatives only need nine more seats to win a majority and leave by the end of January with a deal.”
Corbyn Slams “Trump Alliance”
However, the reaction outside of the government was not so positive. Labour leader Jeremy Corbyn launched a scathing criticism of the move, saying:
“One week ago Donald Trump told Nigel Farage to make a pact with Boris Johnson. Today, Trump got his wish. This Trump alliance is Thatcherism on steroids and could send £500m a week from our NHS to big drugs companies. It must be stopped.”
No-Deal Brexit Risks Rising?
Adam Price, leader of the Plaid Cymru party of Wales was also heavily critical, claiming that the pact raises the risk of a no-deal Brexit.
“That Nigel Farage is willing to endorse Boris Johnson is proof that they are planning to deliver a disastrous no deal. The fact that he assumes there will be no extension at the end of the next phase is evidence enough that a crash-out Brexit is an inevitability in the eyes of the Brexiteers.”
UK Avoids Technical Recession
On the data front, GBP was higher yesterday as the preliminary Q3 GDP reading came in at 0.3%. This was just below the forecast 0.4% reading the market was looking for. However, it was an increase from the prior quarter’s -0.2% reading.
There were fears that another negative number would confirm a technical recession in the UK. However, with the UK not falling into recession over the last quarter, GBP traders have reacted with relief.
The rally above the 1.2782 level has stalled for now. Price is correcting within a contracting channel pattern. While 1.2782 holds, a further move higher is likely with 1.3214 the next big level to watch to the upside. Should we break lower from here, bulls will be looking for a retest of the long term bearish trend line to offer support ahead of the next structural level at 1.2582.