How will the election result affect the markets?

As the markets have priced in a high chance of this Thursday’s election delivering a Conservative majority there is little immediate upside left for the pound or gilt yields, although equities might still get a boost. There is, however, lots of scope for a negative market reaction if there is a different election outcome. In that case, we think that the pound would fall sharply, perhaps from €1.19 and $1.32 to €1.12 and $1.20.