Sterling Under Pressure as Political Uncertainty Continues

Sterling came under renewed pressure yesterday as the UK’s political situation remained uncertain following a hung parliament result in Thursday’s election. The Conservatives are looking to form a coalition government with Northern Ireland’s Democratic Unionist Party.

Previous Day's Market Highlights

Sterling came under renewed pressure yesterday as the UK’s political situation remained uncertain following a hung parliament result in Thursday’s election. The Conservatives are looking to form a coalition government with Northern Ireland’s Democratic Unionist Party.
 
Sterling-dollar fell back below 1.2700 and sterling-euro below 1.1400. Euro-dollar met resistance just above 1.1233, before falling back below 1.1200.
 
Sterling hit new lows against the Canadian dollar since the announcement of the snap election in mid-April. The loonie rallied further on hawkish comments from BoC Senior Deputy Governor Carolyn Wilkins. Wilkins said the BoC would consider whether all monetary stimulus is still necessary given economic growth.
 
Sterling-Aussie is also trading around its lowest levels since the announcement of the snap elections. Sterling is trading around its lowest levels against the kiwi dollar since mid-March.

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1324 1.1760 1.1277 4.11%
GBP / USD 1.2676 1.3048 1.2635 3.17%
EUR / USD 1.1194 1.1283 1.0976 2.72%
GBP/AUD 1.6789 1.7577 1.6731 4.81%
GBP / NZD 1.7561 1.8899 1.7497 7.42%
GBP / CAD 1.6842 1.7822 1.6796 5.76%

Today's Market Highlights

The pound will remain in focus today with the release of May inflation (09:30 BST). Last month, the pound fell as annual CPI rose to 2.7% amidst concerns over the pace of wage growth. Inflation is expected to remain flat, with core inflation slowing. Political uncertainty remains a downside risk.
 
Gains in Economic Sentiment (10:00 BST) in Germany and the Eurozone could offer the euro support. The euro strengthened at the start of the week after polls showed support for President Emmanuel Macron’s party in the first round of France’s parliamentary elections.
 
US PPI, an indicator of inflation, will be closely watched (13:30 BST) amidst concerns over recent softer inflation signals ahead of Wednesday’s interest rate decision. While a rate hike is expected on Wednesday, markets will be watching to see what tone the Fed strikes on inflation and interest rates going forward. 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Core Consumer Price Index YoY (May) 2.3% 2.4%
09:30 GBP Consumer Price Index YoY (May) 2.7% 2.7%
10:00 EUR German ZEW Economic Sentiment (Jun) 21.8 20.6
10:00 EUR Eurozone ZEW Economic Sentiment (Jun) 37.2 35.1
13:30 USD Core Producer Price Index YoY (May) 2.0% 1.9%
13:30 USD Producer Price Index YoY (May) 2.4% 2.5%
23:45 NZD Current Account QoQ (Q1) $1.000B $-2.335B