By ICM Capital
UK PM Theresa May received the House of Commons’ backing for her 8 June election call yesterday, leaving GBP/USD trading just off the 1.28 mark. These highs are levels not seen since October last year, with UK stocks suffering as a result. The election campaign is now on with the Tories maintaining a decent lead. The UK government will still aim to pursue a hard Brexit, leaving trading relations with Europe highly uncertain. Nevertheless, excessive pessimism over the future of the UK economy outside of the EU has apparently faded significantly with this simple surprise announcement for a fresh mandate by the UK PM May. The market appears to see the Conservatives as placed to be returned with an increased outright majority of seats.
Mark Carney will be speaking at 15:30 this afternoon – Volatility is always expected whenever he makes a public address.
EUR/USD remained fairly static last night as it hovered around the 1.07 handle and now looks to extend its side-trend into Europe; investors refrained from placing big bets ahead of the first round of the French presidential election. It will be interesting to see if The Pound tests the 1.20 level again as the market continues to favour the Sterling after news of the UK’s shot-gun election in June.
With a relatively quiet day once again on the data front, the main release in the euro area is consumer confidence (due at 14:00). The latest euro-area unemployment figures showed a decline in February to 9.5%, supporting consumer confidence, which we expect to see increase to -4.1 in April. Like financial and business sentiment, consumer confidence has also proved fairly resistant to political uncertainty, so we expect it to continue on an upward trend despite the uncertain political climate.
The USD has given back its initial Trump inspired rally. Confidence in Trump’s capacity to deliver on his ambitious agenda has faded. Economic recovery outside of the US has gained momentum, attracting capital flow to emerging markets
Markets calmed somewhat overnight following the upheaval in political risks over the past 10 days. The Fed’s beige Book last night painted a still relatively upbeat picture of the US economy, which was echoed by the Fed’s Fischer, suggesting that the global economy is now more robust to tighter monetary policy.
We have two potential market-moving pieces of data from the US at 12:30 this afternoon. Initial Jobless Claims are expected up to 242,000 from 234,000 and The Philadelphia Fed Survey (which is an indicator of manufacturing sector trends) is expected to show a lower reading of 25.0, dropping from 32.8 – Could this result in further weakness for what has already seen a week of losses for the Greenback?
The prices and news mentioned in this outlook are absolutely no guarantee of future market performance and do not represent the view of ICM Capital Limited. Financial markets can move in either direction causing profits to be made or complete losses to be incurred by the trader. Each trader must decide for themselves what their risk appetite is and ensure that correct risk management procedures are in place before placing any trades.