Articles from June 2017



Pound stabilises above post-election lows, political uncertainty reigns supreme

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

After falling in reaction to the outcome of Thursday’s general election, the pound is beginning the week in a more stable position.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

When PM Theresa May called for a snap election back in April her campaign hinged on the promise of maintaining strength and stability during the UK’s Brexit negotiations.

However, it’s fairly safe to say that her ability to deliver on that promise is now in question, with Thursday’s vote leaving the nation more mired in uncertainty than ever.

The Conservatives succeeded in losing their majority, a result which is unlikely to strengthen Theresa May’s hand in exit talks.

May has so far resisted calls for her resignation but the prospect of a minority government backed by the DUP is currently failing to excite much confidence in the government’s ability to secure a good deal for Britain.

While the pound has now stabilised following Friday’s sell off, it remains at multi-week and multi-month lows against the major currencies.

Wise Money markets ahead

With no potentially exciting economic reports on the calendar for today, the fallout from last week’s vote will remain the main driver of GBP exchange rate movement.

If the outcome of the election leads to the pursuit of a ‘soft Brexit’ (where the UK retains access to the single market) the pound could ultimately benefit.

However, if it appears that those members of the Conservative party pushing for a complete severing of the UK’s relationship with the EU are more likely to get their way now that May has lost her majority, the pound could be headed for new lows over the next few weeks.

In light of everything that has happened/is happening, tomorrow’s UK inflation stats may prove less influential than usual.

That being said, the pound could come under further pressure if the rate of inflation eases.

Although the odds of the Bank of England (BoE) reconsidering its current stance on interest rates are minimal (especially in the face of such political uncertainty) easing consumer price pressures would certainly add to the argument in favour of keeping borrowing costs lower for longer.

The GBP/USD exchange rate is also likely to stumble on Wednesday, with the Federal Reserve expected to increase interest rates at its latest policy gathering.

 

 

 

Pound reels as UK left with hung parliament

Is there further for the pound to fall?

Is there further for the pound to fall?

The UK took to the polls yesterday in GE2017 and it is fairly safe to say that Prime Minister Theresa May didn’t get the result she was hoping for.

The pound was left reeling as the votes were calculated and the Conservatives fell short of the 326 seats required for a majority.

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day.

The pound surged back in April when PM Theresa May called the snap election on the widely held belief that the Conservatives would storm their way to an increased majority.

Bets that a landslide victory would strengthen Theresa May’s hand in Brexit negotiations initially kept the pound elevated, but the currency started losing ground as a rocky campaign left her victory in doubt.

GBP exchange rates dropped 2% as last night’s exit polls pointed to a hung parliament, and this time the polls proved accurate.

While these movements are hardly as dramatic as seen following the EU referendum last year, there could be further shifts on the horizon.

With the Conservatives failing to secure the required majority, the UK’s political landscape looks murkier than ever.

If Theresa May listens to calls for her resignation the situation will be even more tenuous with only days left until Brexit negotiations are due to commence.

Wise Money markets ahead

The fallout from the election will be the driving force behind GBP exchange rate movement over the rest of the day, with any shocking announcements (like Theresa May’s resignation) having the potential to extend the pound’s losses.

However, a rapid turnaround in coalition talks and the quick establishment of a working government could help the pound recover.

Although the UK is set to publish industrial/manufacturing production, construction output, trade and growth figures, the data is unlikely to have an impact with eyes so firmly focused on the outcome of yesterday’s historic vote.

 

 

 

Election jitters continue to grip pound

Unsurprisingly, the pound had election poll results to contend with yesterday.

 

Unsurprisingly, the pound had election poll results to contend with yesterday.

The pound has once again become a politically-correlated currency, following developments in election polls over economic data.

As a result, sterling continued to trend around its multi-week lows yesterday against many of its peers.

While the currency markets are scared by the latest UK election surveys, they’re not necessarily convinced.

According to a poll by Survation, the Conservative Party were only one point ahead of the Labour Party, while YouGov’s seat-by-seat projections were now indicating the Tories could end up 22 seats short of a majority.

The polls are causing much confusion.

While Survation’s poll puts the candidates neck-and-neck, the results are weighted according to whether or not the voters themselves say they are likely to actually go to the ballots.

Other surveys, which weight their findings based upon average turnouts for the respondent’s age or social group, for example, find differently.

So, while the currency markets are scared by the latest UK election surveys, they’re not necessarily convinced.

GBP/EUR declined even though, from a broader point of view, the euro wasn’t doing particularly well itself.

Data from the Eurozone was mixed, with retail PMIs weakening for Germany, Italy and the Eurozone as a whole, but strengthening in France. The German construction PMI also rose, while the Sentix investor confidence index beat predictions for June and Eurozone retail sales volumes outpaced estimates at 2.5%.

Weakness in the pound was the only thing that allowed the US dollar to make any gains, pushing GBP/USD marginally lower. Big things are happening in the US as well as the UK, so the currency markets were holding their breath for Thursday’s developments.

Today is the calm before a triple-whammy storm on Thursday, which is likely to see the pound stagnating against most of the major currencies.

An approaching election might be dragging force on sterling, but with other high-profile global happenings on the calendar, GBP could be afforded something of a reprieve.

 

 

 

 

Little on European markets but potential big day for the GBPUSD pair

The key event of yesterday the June ECB meeting had little effect on wise money markets.

The key event of yesterday the June ECB meeting had little effect on wise money markets.

Mario Draghi continued to put emphasis on the ECB standing ready to input more Quantitative easing, if deemed necessary.

Markets had little reaction as this is considered old news at this stage and as a result, there was no major direct influence on the Euro. Most of yesterday was generally fairly quiet in terms of other Euro data, or rather lack of.

Looking at the main Euro pairs over the last 24 hours, they’ve been trading in tight ranges and only differ slightly from yesterday’s open.

This is relatively calming following the yoyo-like movements we’ve previously been seeing due to Brexit uncertainty and the changing sentiment polls.

It looks like EURUSD is on its way back down from its early May rally and most of the majors are looking a little worse off than a couple of weeks ago.

 

Wise Money awaiting US Non-Farm Payroll figures

 

Looking ahead at the dollar, today we have the US Non-Farm Payroll figures for May due for release at 13:30.

Following the Fed’s preconditions of a rate hike being dependent on a continuing improvement in the labour market, these figures are likely to be watched very closely.

If today’s figure is close to the forecast (164,000), it should strengthen expectation for a Fed rate hike through the coming summer months.

This could provide us with some upwards movement as we move into this weekend.

 

 

 

 

 

Pound rattled on new referendum poll

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

 

The pound dived sharply yesterday on the release of a new poll that showed a surprise lead for the leave camp.

Over the last two weeks we have seen good momentum for the pound off the back of polls, suggesting the remain camp was pulling ahead.

However, it was almost inevitable that we would see a conflicting poll suggesting the opposite, and yesterday two Guardian/ICM polls showed a split of 52%-48% in favour of a Brexit.

The pound fell sharply against the USD and the euro on this news, and is continuing to struggle this morning. In the run up to polling day we are likely to see the pound pulled around significantly as conflicting polls and news drive price action.

Wise money news to come

Today the focus will continue to be on the Brexit momentum as we start the month of June.

In addition we have ISM manufacturing data from the US later today and sentiment is split on the momentum for manufacturing, and a weak number cannot be ruled out.
Elsewhere, we have substantial amounts of PMI data from the Euro area, France and Germany. The initial Euro area number came in slightly weaker, however Germany and France both showed good uplift.

The interest today will be in the periphery and the potential for the numbers here to be soft.