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Pound falls following election

9th June 2017 Market Update

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🇬🇧 GBP – No real big movements during the day ahead of the result as traders and investors awaited the exit polls, which marked the start of the counting process. Due to the rules surrounding the election, no candidates were allowed to canvas or actively promote themselves and there was no data released, so a pretty lacklustre day for the pound.

The Exit Polls last night showed a surprising result, with Labour set to gain over 30 seats and the Tories to lose 17. The market dropped almost instantly by just under 2% and has been rather rocky since, however, we appear to be holding at current levels. By the end of counting it emerged that there would be a hung parliament. The next steps will be to either seek a minority government, which whilst possible is very unlikely, form a coalition, or hold another General Election.

Manufacturing production results are to be released at 9:30am for the UK, however, it is unlikely to have any effect on the market, regardless of the figure.

🇪🇺 EUR – The ECB chose not to change interest rates on their main refinancing operations, the main source of liquidity to European banks, and as such there were no real euro moves.

Banco popular was in dire need of assistance due to liquidity issues earlier on in the week, which caused regulators to intervene and engineer a rescue plan. The struggling bank was then sold to Banco Santander, its larger rival. This was hailed as a victory for the EU, possibly showing that they can resolve major banking issues swiftly and efficiently, which was something they had been criticised for in the past.

Nothing of note out for the Euro today, with the currency taking a back seat due to the UK General Election.

🇺🇸 USD – Unemployment claims came out for the US yesterday afternoon. No major shocks as the figure came in only marginally above what was expected. Yesterday evening we had the former Director of the FBI, James Comey, giving his testimony to the Senate intelligence committee in regards to possible ties between Trump and Russia during the 2016 presidential campaign. He delivered a few bold statements, however, it may take the market a day or so to interpret all that was said.

Nothing of note being released from the US today.

 

Key Announcements

🇬🇧 GBP
09:30am – Manufacturing and Industrial Production figures.

🇨🇦 CAD
13:30pm – Employment Change and Unemployment rates.

 

Our View: With the election result showing a hung parliament, a sense of uncertainty surrounds the pound. Unless an effective strategy is implemented, we may see Sterling lose all of this year’s gains.

 

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Darren Kilner

Darren Kilner

Darren is Head of Dealing at FairFX. Darren lives and breaths FX, his Mastermind topics are G8 currencies and economic forecasts.

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