SEK: USDSEK Bounce Still Considered Corrective With 50-day EMA Intact

• GBP is modestly outperforming Tuesday, helping GBP/USD recover a small part of the Monday losses, after the USD rally through the UK Bank Holiday resulted in the 100-dma of 1.3431 coming under pressure. Domestic newsflow in the UK remains highly critical of the government, however the consequences for government remain minimal: Polymarket ascribes only a 9% chance of UK PM Keir Starmer leaving office this year - close to a contract low - however political fragility will likely persist across the publication of the Autumn Budget, ahead of which the UK Treasury are said to be exploring several further revenue raising measures, including property tax reform and a potential wealth tax.
• Ahead of the Budget (likely late October/early November), vols are recovering off seasonal lows: EUR/GBP 3m implied vols have recovered the entirety of the early August dip - with EUR, USD vols also improving.
• The 30-min candle chart shows EUR/GBP testing the nascent uptrend drawn off the late May lows of 0.8356. The level, today at 0.8624-0.8627, has been tested, and a break below could mark a resumption of the fade off 0.8769, opening 0.8508 in the short-term.
• Options interest later this week is clustered around month-end, with E1.3bln rolling off at 0.8575 and E2.2bln at 0.8700-50 - strikes which could contain the range in the cross over the coming week, suppressing vol. 

Leader of the right-wing populist party Reform UK, Nigel Farage, has claimed that financial market turmoil could spark a snap general election. Answering press questions following a high-profile speech outlining Reform's 'Operation Restoring Justice' plans for mass deportations of illegal immigrations, Farage was asked a question that referred to the next election being due in 2029. 

• Responding, Farage said: "Four years to the next election, do you really think so? I think the 30-year bond market is giving us a somewhat different indication. Particularly as we have a chancellor of the exchequer [...] who is clearly desperately out of her depth, and actually I'm not sure there's anybody in the Cabinet who really has a clue how to turn around the economic downward spiral, and possibly even fiscal doom-loop that we're beginning to enter into. So [the gov't] may not last quite as long as you think."
• Data from Smarkets assigns a 33.6% implied probability that PM Sir Keir Starmer leaves office in 2029 or beyond, meaning a cumulative 66.4% implied probability that he leaves No.10 between 2025-28.
• The main threat to Starmer's position is likely to come from an internal challenge within his centre-left Labour Party, rather than a snap general election. Labour holds a large majority in the House of Commons, and with the party trailing Reform UK by an average of 8.5% in August polling, the chances of the gov't triggering an election at this point are minimal.
• Political focus in September will swiftly coalesce around the annual party conference season. Reform UK holds its conference significantly ahead of the other main parties. on 5-6 September. The centrist Liberal Democrats follow on 20-23 Sep, Labour on 27 Sep-1 Oct, and the Conservatives on 5-8 Oct. 

Chart 1. General Election Opinion Polling, % and 6-Poll Moving Average

Source: YouGov, More in Common, Opinium, Techne, Find Out Now, Freshwater Strategy, BMG, Survation, Lord Ashcroft Polling, Focaldata, JL Partners, Whitestone Insight, Deltapoll, Stonehaven, We Think, MNI

• In the FI space, Bund futures are unchanged and remain above their recent lows. A bear threat is present. The contract recently breached 128.84, the Jul 25 low. Note that 129.00 represents the base of a broad range. A clear range breakout would strengthen a bearish theme. This would open 128.40 initially, the Apr 9 low. Strength above the 50-day EMA of 129.80, is required to signal a reversal. Resistance at the 20-day EMA is at 129.51.
• A bear cycle in Gilt futures remains in play. Note that on the continuation chart, moving average studies are in a bear-mode position, highlighting a clear downtrend - for now. First support to watch is 90.31, the Aug 22 low. It has been pierced, a clear break would resume the bear leg and open the 90.00 handle. Initial resistance is at 91.24, the Aug 18 high.