Headlines
Sterling surges on unofficial exit poll –
Conservatives likely to head government.
Traders buoyed by decisive vote –
Unexpected majority for Tories.
Pound up 2 cents vs. Euro –
200 pips stronger vs. US Dollar.
US Non-Farm payrolls report on tap –
Soft print could boost ‘Cable’.
Sterling
Demand for Sterling surged last night when the first unofficial exit poll showed that the Conservatives were likely to have won 316 seats out of a possible 650. The poll put Labour on 239, the Scottish National Party on 58, the Liberal Democrats on 10 and the United Kingdom Independence Party on two.
The possibility of either the Tories or Labour receiving such a high number of seats looked unlikely before polling day, with pre-election polls pointing towards one of the closest votes for decades. Since then forecasts have been adjusted to give the Conservatives 329 seats, enough for a majority. The upshot of this is that Britain won’t be plunged into a long period of economic uncertainty as leaders squabble; and the Conservatives continuing with current policy was viewed as positive for the Pound.
Despite the now increased threat of an in/out EU referendum, markets were cheered by the more-decisive-than-anticipated nature of the vote.
Euro
Sterling jumped almost two cents against the Euro last night in reaction to the first unofficial exit poll.
The price to insure against large swings in the value of the Pound surpassed that preceding the Scottish independence referendum yesterday to reach the highest level for over five years. This weakened the UK currency. However, the Pound skyrocketed higher during the evening in response to an initial exit poll which paved the way for another Tory coalition government. It seems that the impact on the currency market could have been similar if it had been Labour who came out on top: markets were just happy to (hopefully) avoid a long, drawn-out period of negotiations.
Confidence that Greece could, one day this millennia, agree a deal with its creditors improved yesterday following upbeat remarks from Greek finance minister Yanis Varoufakis and German finance minister Wolfgang Schaueble.
Interestingly, media magnet Varoufakis was also in the headlines relating to a rumour that his wife was the infamous girl who ‘came from Greece…had a thirst for knowledge [and] studied sculpture at St Martins College’ from the Britpop band Pulp’s classic hit ‘Common People’. The details don’t quite match but it’s a nice thought nonetheless.
US Dollar
Propelled by what some considered to be a positive outcome from yesterday’s general election, Sterling reached a weekly high against the US Dollar yesterday evening. ‘Cable’ rallied by around 200 pips when newswires reported that the Conservatives were likely to have gained the most seats of any political party.
GBP/USD could continue to strengthen later today if US non-farm payrolls disappoint. But if the key labour market figures comes in at 236,000, as predicted, then we could see Sterling slide back down as Federal Reserve rate hike bets re-enter the equation.
Canadian Dollar
Traders reacted even more vociferously to the early UK general election poll when it came to driving Sterling higher against the Canadian Dollar. Whereas the Pound managed to claim two-cent daily gains against its closest currency rivals, the Euro and the US Dollar, the UK tender was able to rally by a full three cents against the ‘Loonie’ yesterday. On top of the unofficial exit poll, sentiment towards the Canadian Dollar was hurt by speculation that today’s unemployment rate report could see the jobless rate rise from 6.8% to 6.9%.
Australian Dollar
The Pound to Australian Dollar exchange rate bulldozed its way to a near-four-cent gain yesterday as markets reacted to disappointing Australian jobs data and the hope of a new coalition government in Britain.
The Australian unemployment rate printed at 6.2% for April, which undershot analysts’ expectations of a fall to 6.1% and reflected a surprise -2,900 contraction in the number of those in work.
New Zealand Dollar
As markets continued to sell the New Zealand Dollar following this week’s dud domestic unemployment report, the unofficial UK general election poll allowed Sterling to register a stunning four-cent gain against the ‘Kiwi’.
Data Released Today
09:30 GBP Visible Trade Balance (Pounds) (MAR)
13:30 CAD Unemployment Rate (APR)
13:30 CAD Net Change in Employment (APR)
13:30 USD Change in Non-farm Payrolls (APR)
13:30 USD Unemployment Rate (APR)
13:30 USD Average Hourly Earnings (YoY) (APR)