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Analysts at CIBC Capital Markets say don't discount a post-Makerfield move.
Pound Sterling Live reports this week that the British currency will likely be immune to news of Andy Burnham winning the Makerfield by-election, given it's a result that's been well telegraphed by polling and bookie odds for some time.
The implication of a well-known outcome is a muted currency market reaction, which should be reflected in Friday's FX trade.
However, seasoned FX veterans at CIBC Capital Markets think there is still some volatility to be had on the event.
Noah Buffam at CIBC Capital Markets said in a preview note, out last week, that although it "appears well priced at this point," it's not entirely priced.
He notes that a 10% drop in Kalshi odds in favour of Burnham on June 11 translated into an approximate 10 pip move in EUR/GBP.
"This suggests that a win for Burnham could lead to 20 pips of upside in EUR/GBP," says Buffam.
As is always the case in FX, the biggest market moves tend to follow the biggest surprises. And here, the surprise would be Burnham losing to Reform's Robert Kenyon.
Buffam estimates there's potentially "80 pips of downside on a loss" for EUR/GBP.
Given today's prices, that takes EUR/GBP down to 0.8563.
For the pound-to-euro exchange rate, that would translate into a push through resistance at 1.16 to 1.1687, delivering the highest levels in more than a year.
As always, with these predictions, it must be caveated that the call by CIBC was made last week at different levels. Global contexts have shifted with the war in Iran looking a little closer to ending.
Then there's the Bank of England policy decision that also falls on Thursday.
So this estimate is not a fixed forecast, instead it should serve as a guide to indicate that there remains the potential for volatility on Thursday's election result.
