With the UK waking up to the 'gift' of Brexit for Christmas and a large majority government in place, markets finally have more clarity and certainty; the UK will leave the European Union by the end of January next year.
At the currency level, sterling appreciated to $1.35 on the release of the exit poll, which correctly predicted the large majority. We expect sterling to hold on to these gains supported by a boost to Gross Domestic Product (GDP) based on a release of pent up consumer and corporate demand in early 2020.
A large Conservative majority also affords Prime Minister Boris Johnson more control of the agenda and to not be tied to the more extreme Brexit wing of his party. This could lead to markets discussing softer styles of Brexit rather than worry about another hard Brexit cliff edge for 2020.
Rate markets are likely to trade initially at higher yields on the prospect of better GDP data and reduced rate cut expectations. A new budget is provisionally scheduled for March where we expect more fiscal loosening. The long-end of the gilt curve will be reassured by the modesty of the budget increase relative to that in Labour's manifesto.
Looking ahead, the gilt market will be focussed on whether the data actually bounces from this election result as expected. It will also have an eye on the consultation on the reform to the way the Retail Prices Index measures inflation and who the next Governor of the Bank of England will be.