Sterling Fluctuates – Businesses Lose Confidence
Last week the Pound (GBP) suffered its most significant one-day drop for eight months as election turmoil rocked the currency. Theresa May losing her parliamentary majority spelled serious tumult for Pound Sterling amid mounting confusion and uncertainty regarding the nature of a coalition government.
May, decidedly not resigning, has committed to garnering the support of the conservative Northern Irish Democratic Union Party (DUP), who she is now in negotiations with. However, there are many that believe her position is now untenable.
The trajectory of the Pound this week is dependent on to what level this uncertainty is assuaged and business confidence renewed. As of this morning, (Monday) the Pound has extended losses. Any news that may suggest further uncertainty in Britain’s Brexit negotiations (particularly regarding access to the single market) is likely to cause investors to sell.
Keep an eye on tomorrow’s consumer price index release, as the slight dip in inflation expected by economists may push the Pound even further into its slump.
GBP/EUR Slips to Seven Month Low – Possibility of Retaining Access to Single Market Gives Some Hope
GBP/EUR nosedived to the murky depths of a seven-month low on Friday as a result of the UK general election and remains around these levels.
Some argue that the prospect of a softer Brexit could mitigate the worries of more skittish traders, as they will be less inclined to sell should there be indications that the UK will retain some links to the EU single market. This, however, remains to be seen. Brexit negotiations were due to start within a week’s time – but these may be put on hold if a working government isn’t formed.
Cable Hits Two-Month Low – Trump-Comey Row has Little Impact on US Dollar
Election turmoil caused the Pound to fall some two cents against the US Dollar last week, with the GBP/USD exchange rate hitting its lowest level for two months.
Uncertainly plagues all Sterling pairings at the moment, and continued deprecations against most majors seem likely to continue until confidence is renewed.
The US Dollar, meanwhile, is due to garner some support later in the week with the Federal Reserve looking to hike interest rates. Wednesday will see a slew of big data, including the US consumer price indexes, average weekly earnings numbers, advance retail sales figures and crude oil inventories.
The Trump-Comey row continues, but is currently proving ineffectual in terms of creating US Dollar movement. US Attorney General Jeff Sessions is due to testify on Tuesday.
GBP/CAD Slumps – Positive Employment Data Boosts the ‘Loonie’
The GBP/CAD exchange rate was also languishing as a result of the election outcome, with the Pound struggling at its lowest levels since April.
The Canadian Dollar was also boosted by Friday’s news that some 77,000 full-time workers were added to payrolls for May – a significant turnaround from April’s job gains of only 31,000.
Qatar’s energy minister announced on Sunday that the country will remain committed to the OPEC oil output limitations, despite the severing of ties with Saudi Arabia – somewhat good news for oil prices (and Canada by extension), despite Qatar’s comparatively small oil output.
Pound Falls to Two-Month Low against Australian Dollar – Fluctuating Iron Ore Prices May Influence
Sterling plunged to a two-month low against the ‘Aussie’ last week as traders sold the Pound in response to uncertainty following the UK election.
Fluctuating iron ore prices may impact the Australian Dollar this week, but the most significant antagonist will be announcements regarding the Conservative – DUP coalition.
Pound Sterling Tumbles against New Zealand Dollar – Data Forecast for the Week Positive
Sterling fell some three cents against the New Zealand Dollar last week – taking GBP/NZD to lows we haven’t seen since March. Despite a brief period of stability this morning, further decreases are likely in the face of severe political uncertainty.
New Zealand’s export and labour markets remain robust, and this week will see the release of domestic current account and gross domestic product data – both are forecast to be positive.
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