Sterling
The Pound tumbled overnight and extended losses this morning after the results of the election stunned markets and political commentators. GfK Ipsos MORI’s exit poll, conducted for the BBC, Sky News and ITV News, showed that the Conservatives would fall short of a majority. Staggeringly, the survey seems to have been almost bang-on in its estimations, with the Tories securing just over 48% of the vote.
Given the curveball thrown at markets by the election results, it is unlikely anyone will pay attention to today’s UK industrial production, manufacturing production, construction output or trade data.
Euro
The Pound Sterling to Euro exchange rate fell almost -2% to a 20-week low the second the exit polls were released and GBP EUR has inched lower still to brush 1.12. The prospect of a hung parliament has thrown Theresa May’s plans for Brexit into chaos – assuming she can resist the swiftly-increasing pressure from all sides to resign.
The Euro has erased all of its losses from yesterday, after plummeting on the back of the latest European Central Bank (ECB) developments. The Governing Council took a miniscule step towards being more optimistic on interest rates, but then cut its inflation forecasts to 1.5% from 1.7% in 2017 and to 1.3% from 1.6% for 2018.
US Dollar
GBP USD tumbled to a seven-and-a-half-week low of 1.27 on the back of the exit polls, with markets digesting the fact that Theresa May’s attempt to firm her majority had catastrophically backfired. The pairing then dipped as low as 1.26.
The much-awaited testimony before the US Senate intelligence committee from former FBI Director James Comey turned out to have little impact upon the US Dollar.
Canadian Dollar
The Pound has managed to curb its losses against the Canadian Dollar to 1.71, after falling last night to its lowest level since the end of May as the results of the election became clear.
The ‘Loonie’ had weakened yesterday as the oil markets continued reeling from the latest US inventories report. However, CAD losses slowed after oil met support before falling to a fresh multi-week low, which indicated to traders that there was enough demand to keep crude from dropping too far.
The Canadian Dollar could press higher against the Pound if today’s high profile employment data shows increasing job creation.
Australian Dollar
GBP/AUD is currently trading around a seven-and-a-half-week low of 1.68. Theresa May has ruled out quitting as party leader, but many commentators believe this has left Brexit negotiations in a worse place than before; are EU leaders likely to treat her seriously when she hasn’t got an strong mandate from the British people?
This weakness has proved rather useful for the Australian Dollar, which had yesterday faced headwinds from an enormous narrowing in the trade surplus as the full impact of Cyclone Debbie was revealed. Exports fell -8%, with coal alone nearly halving, taking the surplus down to AU$0.55 billion from AU$2 billion.
New Zealand Dollar
GBP/NZD was already on bearish form yesterday even before the release of the exit polls, as weakness in the US Dollar and the strong fundamentals of the New Zealand economy kept appetite for the ‘Kiwi’ strong.
The Pound remains at around an eleven-and-a-half-week low of 1.76.
Data Released
08:30 GBP Industrial Production (YoY) (APR)
08:30 GBP Manufacturing Production (YoY) (APR)
08:30 GBP Construction Output SA (YoY) (APR)
08:30 GBP Total Trade Balance (Pounds) (APR)
12:00 GBP NIESR Gross Domestic Product Estimate (MAY)
12:30 CAD Net Change in Employment (MAY)
12:30 CAD Unemployment Rate (MAY)