How to make money from Britain's general election

WHILE lovers of political theatre will be glued to their televisions on election night, traders will be glued to their Bloomberg terminals. If the last election is anything to go by, there will be plenty of opportunity for those looking make money on foreign-exchange markets, which remain open throughout the night.

A key lesson from the last election, held on May 6th 2010, is that exit polls matter. Back then, just after the main 10pm polls were published, sterling rallied for two minutes on the back of the news that the Tories had won (see first chart). But it then dipped sharply, by 1.5% within 15 minutes, as the markets realised that they did not have a majority (panic)—and that there could even be a Labour-Liberal Democrat coalition (double panic). Then, as results began to trickle in throughout the night, sterling strengthened whenever there...Continue reading