Poll Results Fuel Sterling Volatility
Morning mid-market rates – The majors
June 6th: Highlights
- Polling Day just 48 hours away
- Conservative lead either 1% or 11%!
- Pound mixed as data disappoints
A matter of opinion
It has been a difficult campaign for all concerned but with the U.K. General Election on Thursday, we are entering the final straight.
Opinion polls are supposed to be a tool which provide a guide as to how the manifesto’s and campaigns are capturing the attention of the voters. Instead they have become the focus of attention, their mechanics being picked apart. In the modern era of social media, polls have lost relevance to a certain degree but they still command attention.
The two latest polls published illustrate perfectly the problems that have beset the industry. One shows a Conservative lead at a precarious 1%, the other a comfortable 11%.
Against the dollar, the pound has been whipsawed as every event, on both sides of the Atlantic, influences traders and the market.
Sterling reached a high of 1.2941 as disappointment over Friday’s employment report call into question the future path of U.S. interest rates. It has remained well above the 1.2900 level which has become pivotal in recent days, currently trading around 1.2930.
Against the Euro, the pound has struggled to make headway. Politics and economic data are combining to drive a stronger common currency.
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Services data disappoints
The latest piece of data, services activity joined the “negative influences” as it fell from 55.8 in April to 53.8 in May. A read of above 50 denotes expansion but with services being a major influence on economic activity, a slower rate of growth is worrying. The ability of the City of London to remain the major global influence post-Brexit has been called into question, with both Paris and Frankfurt eagerly waiting to take up the slack.
Whilst the election will, rightly, be the major influence over the pound this week, the performance of the economy is providing a more permanent backdrop. BoE Governor Mark Carney has dealt with concerns over inflation rising to close to 3% by citing the slowing economy as the main reason to delay any monetary policy response. The independent NIESR research institute will release its estimate of U.K. growth for the three months to May later in the week with a likelihood that, according to their model, GDP was 0.2% at best.
Market bracing for “Perfect Storm”
The U.K. General Election will be the focus of most people in the U.K. despite the fact for most of the day, there will be a news blackout to avoid any undue influence. As the polls close at 10.00pm, the whole media electoral machine will swing into action with the first results around midnight.
Earlier in the day, the Governing Council of the European Central Bank will meet to discuss monetary policy. Given Mario Draghi’s continued concerns (partly justified) over the resilience of the Eurozone economy, there will continue to be “baby steps” towards both a normalization of policy and a hike in rates.
Today is the 73rd anniversary of D Day but D Day for Donald Trump could be coming on Thursday. James Comey, the former Director of the FBI, will testify to the Senate Intelligence Committee, on whether Trump tried to get him to back off an investigation into alleged ties between the president’s 2016 campaign and Russia.
Impeachment proceedings could start as early as next week were suspicions of wrongdoing by the President be confirmed.
Have a great day!
About Alan Hill
Alan has been involved in the FX market for more than 25 years and brings a wealth of experience to his content. His knowledge has been gained while trading through some of the most volatile periods of recent history. His commentary relies on an understanding of past events and how they will affect future market performance.”