Sterling Volatility on Election Results

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 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.
 
Sterling-dollar fell to its lowest levels since Prime Minister May called for the snap election in April. Sterling-euro fell to its lowest levels since the pound stumbled in January ahead of a speech in which May outlined the government’s Brexit aims.  
 
Heightened political uncertainty is a threat to the pound, but in the longer term, sterling could benefit if this leads to expectations of a softer Brexit, although the negotiations themselves remain a downside risk
 
Other highlights yesterday included the ECB meeting. The euro briefly strengthened as the ECB omitted its interest rate easing bias (removing the words “or lower”) from its statement, but was otherwise less hawkish than some investors had speculated. The Bank cut its inflation projections and raised growth forecasts as expected.
 
The dollar was largely steady during former FBI Director Comey’s testimony before the Senate intelligence committee. The political drama has increased concerns over Trump’s ability to govern and pass tax measures. 

Currency Pairing 08:00 Today Vs 08:00 Yesterday Four-Week High Four-Week Low % Change
GBP / EUR 1.1319 1.1866 1.1289 4.86%
GBP / USD 1.2664 1.3048 1.2635 3.17%
EUR / USD 1.1189 1.1283 1.0839 3.94%
GBP/AUD 1.6798 1.7577 1.6770 4.59%
GBP / NZD 1.7567 1.8899 1.7535 7.22%
GBP / CAD 1.7119 1.7822 1.7092 4.10%

Today's Market Highlights

The pound will remain in focus as markets continue to digest the election results. Additional sterling weakness will likely be seen as investors digest the implications of a hung parliament.
 
UK data may be of fleeting interest, with Industrial and Manufacturing Production (09:30 BST) forecast to pick up from March to April, but will likely be overshadowed by politics.
 
In the afternoon, Canada releases employment data.
 
Next week, the Fed will be in focus as markets anticipate a rate hike on Wednesday. 

Today's Economic Calendar

Time Currency Release Consensus Previous
09:30 GBP Manufacturing Production MoM (Apr) 0.9% -0.6%
09:30 GBP Manufacturing Production YoY (Apr) 0.7% 2.2%
09:30 GBP Industrial Production MoM (Apr) 0.8% -0.5%
09:30 GBP Industrial Production YoY (Apr) -0.2% 1.4%
09:30 GBP Goods Trade Balance (Apr) £-12.00B £-12.05B
13:30 CAD Unemployment Rate (May) 6.6% 6.5%
13:30 CAD Net Change in Employment (May) 11.0K 3.2K