Why sterling can rise after UK polls

Dubai - Here are 10 reasons why the election can have 'seismic implications' for the pound

England has no permanent friends and no permanent enemies, only permanent interests." This observation by Victorian statesman Lord Palmerston to justify cynical imperial diplomacy applies equally to Theresa May and the Conservative Party. The prime minister stunned financial markets with her decision to call a general election in June, even though Downing Street had denied rumours she would do so. Mrs May knows that a snap election will enable her to increase the Conservative Party's majority in the House of Commons to at least 100 MPs. This electoral calculus has seismic implications for the sterling dollar exchange rate, cable. My call? Sterling rises to 1.36 after Election Day in June. Why?
One, London bookies put a 28 per cent probability that the Tory majority in Westminster will rise to 100. Fine. This means Mrs May will finally win political legitimacy and votes - to secure a soft Brexit deal with the EU. The malign influence of the 50-odd "hard Brexit" Tory backbenchers on 11 Downing Street would be diluted. This means Britain will finally enjoy a stable Conservative government led by a prime minister who won a general election in her own right, not merely inherited it after David Cameron committed a political hara-kiri last June. This is sterling bullish.
Two, the EU divorce settlement will be more easily negotiated since it will no longer be held hostage by the virulent anti-Europe hard exit factions in the Conservative Party who have engineered regicide in Tory politics so many times since Mrs Thatcher's ouster in 1989. This scenario is sterling bullish.
Three, Britain can increase its fiscal spending after the election. Given elevated inflation risks after the 15 per cent sterling fall after June 23, the Bank of England would accelerate its timetable for a rise in the money market policy rates. This is sterling bullish.
Four, Mrs May will insist on immigration reforms, border curbs and freedom from EU courts as these are key Tory demands. Yet she could well compromise with the EU on trade and "passporting" rights for banks operating in the City of London. This means the risk of a breakdown in Brexit negotiations fall while the odds of a deal more favourable to the banking oligarchs of the Square Mile increases. This is sterling bullish.
Five, it made strategic sense to be bearish on sterling since at least the autumn of 2014. Now politics and monetary policy argues that it is insane to be bearish on the pound. The sterling bears will face the mother of all short squeezes as the structural short position in Planet Forex is assailed. This is sterling bullish.
Six, the Scottish National Party swept every Scottish seat in parliament in the 2015 election. If the SNP loses Scottish seats to the Tories in June, the prime minister will gain the political capital to ignore Nicola Sturgeon's call for a new referendum on an independent Scotland. This will be a reprieve for the fate of the United Kingdom and will defuse the uncertainty time bomb. This is sterling bullish.
Seven, the 2017 election will write the political obituary of the loony left leader of the Labour Party. Jeremy Corbyn is the Micheal Foot of our era, an unelectable asset for an incumbent Tory (lady!) prime minister. My advice to Mr Corbyn? You turn if you want to. This lady's not for turning. Net-net, Labour could well lose 40 seats in June. UKIP? A sad joke. This is sterling bullish.
Eight, I am no expert on UK politics, but friends in London tell me the Tories will thrash Labour in the Midlands and the North of England while the Lib Dems pick up three to five seats in Southwest England and the Home Counties. Could Theresa May lead a government with 390 seats in the Commons! Yes, she can. This is sterling bullish.
Nine, Britain high propensity to import ensure that food and petrol prices will continue to rise in 2017. Yet sterling's surge in April even ignored mediocre retail sales, a classic result of consumer inflation. The balance of power in the next MPC conclaves in the Old Lady of Threadneedle Street will tilt to tightening, not easing. This is sterling bullish.
Ten, I have abandoned the "short sterling" paradigm that motivated my post-Brexit positioning. Even the Maestro of Palm Jumeirah is long the quid. My call? A 120-seat landslide majority for the Tories and 1.36 on cable in June. So, there!
The writer is a global equities strategist and fund manager. He can be contacted at mateinkhalid09@gmail.com.