Pound Steadies, Politics Remains in Focus

Sterling has tumbled over 2% against both the pound and the euro since last night’s shock exit poll projected a hung parliament. Having initially been expected to win by a landslide, putting the government in a stronger position ahead of Brexit negotiations, the Conservative Party failed to win an outright majority.

Previous Day's Market Highlights

Sterling stabilised Friday following an approximately 2% drop against both the euro and the dollar after exit polls suggested a hung parliament, taking markets by surprise. The Conservatives are looking to form a coalition with Northern Ireland’s Democratic Unionist Party after failing to secure an outright majority.
 
Sterling-euro fell to the lowest point since 15 January, when the pound dropped ahead of a speech from Prime Minister May outlining the government’s Brexit aims.  Sterling-dollar fell to the lowest point since the announcement of the snap election on 18 April, but held above pre-announcement lows.
 
UK data were largely overshadowed by the election results. Manufacturing and Industrial Production disappointed expectations.
 
According to an exit poll Sunday, French President Emmanuel Macron’s party won approximately a third of the vote in the first round of parliamentary elections. Voter turnout was at a record low. The second round of elections is on 18 June. The euro strengthened against the dollar as markets opened Sunday evening. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1368 1.1824 1.1289 4.52%
GBP / USD 1.2744 1.3048 1.2635 3.17%
EUR / USD 1.1211 1.1283 1.0839 3.94%
GBP/AUD 1.6921 1.7577 1.6770 4.59%
GBP / NZD 1.7738 1.8899 1.7535 7.22%
GBP / CAD 1.7147 1.7822 1.7092 4.10%

Today's Market Highlights

Politics will remain in focus as the economic calendar gets off to a quiet start today. Markets will keep an eye on any developments in the Conservative Party’s formation of a new government. Assistant RBA Governor Debelle speaks at the Global FX Code of Conduct Launch (09:30 BST).
 
It’s a busy week for the UK, with CPIlabour market, and Retail Sales data out, and the Bank of England’s latest interest rate decision on Thursday. No monetary policy changes are expected.
 
The main event of the week is Wednesday’s likely Fed rate hike. While the hike itself is largely priced in—with odds at around 96%, according to CME’s FedWatch Tool—the dollar’s strength will likely depend on the guidance given regarding a possible third hike later this year. Other releases of note from the US include CPI, PPI, and Retail Sales figures. 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 AUD RBA Assistant Governor Debelle Speaks
19:00 USD Monthly Budget Statement (May) $-86.5B $182B
02:30 AUD NAB Business Confidence (May) 13