The US dollar roared higher on Wednesday following some hawkish comments from Federal Reserve Chair Jerome Powell, following the US central bank’s latest interest rate decision.
GBP/EUR was down -0.3% to €1.1435, GBP/USD -0.2% to $1.2886, GBP/AUD slid -0.4% to AU$1.7166, GBP/NZD had fallen -0.9% to NZ$1.7946 and GBP/CAD slipped -0.1% to CA$1.7370.
How is the pound likely to fare during the final day before Britain heads to the polls? Keep reading and see…
What’s been happening?
Unsurprisingly, the pound had election poll results to contend with yesterday.
According to a poll by Survation, the Conservative Party were only one point ahead of the Labour Party, while YouGov’s seat-by-seat projections were now indicating the Tories could end up 22 seats short of a majority.
The polls are causing much confusion. While Survation’s poll puts the candidates neck-and-neck, the results are weighted according to whether or not the voters themselves say they are likely to actually go to the ballots. Other surveys, which weight their findings based upon average turnouts for the respondent’s age or social group, for example, find differently.
So, while the currency markets are scared by the latest UK election surveys, they’re not necessarily convinced.
GBP/EUR declined even though, from a broader point of view, the euro wasn’t doing particularly well itself.
Data from the Eurozone was mixed, with retail PMIs weakening for Germany, Italy and the Eurozone as a whole, but strengthening in France. The German construction PMI also rose, while the Sentix investor confidence index beat predictions for June and Eurozone retail sales volumes outpaced estimates at 2.5%.
Weakness in the pound was the only thing that allowed the US dollar to make any gains, pushing GBP/USD marginally lower. Big things are happening in the US as well as the UK, so the currency markets were holding their breath for Thursday’s developments.
What’s coming up?
Today is the calm before a triple-whammy storm on Thursday, which is likely to see the pound stagnating against most of the major currencies. An approaching election might be dragging force on sterling, but with other high-profile global happenings on the calendar, GBP could be afforded something of a reprieve.
One of those other big risks will come from the US. Former FBI Director James Comey is set to testify before the Senate intelligence committee on the investigations into alleged Russian interference with the US Presidential Election last year.
Not only will the UK election cause volatility for EUR due to the implications for the Brexit negotiations, but also Thursday is when the European Central Bank (ECB) next meets to discuss monetary policy.
If policymakers don’t hint at tapering the vast quantitative easing programme, the euro is likely to fall.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)