Sterling dips again following latest YouGov poll

Sterling took a hit overnight after the latest YouGov poll showed that the Conservatives could now fall short of an overall majority (by 16-seats) in next week’s election.

The Pound had rallied heavily after the announcement of a snap election last month, as Prime Minister May was expected to commandeer a large majority in Parliament. Traders felt this would give her more power over the Brexit negotiations and therefore increased the chance of achieving a better deal (and softer Brexit). As the campaigns have moved forward, however, the polls have shown that the gap between the Tories and Labour has been diminishing. Until last night’s survey, the Tories still looked to have a healthy majority, but now it appears momentum has swung the other way and the odds of a hung parliament have increased.

No-one really anticipated a hung parliament and the prospect of one increases political uncertainty and therefore reduces the appeal of the Pound in the short term. Longer term, however, the jury is still out on what impact this would have on Sterling, as some traders feel that a hung parliament would eventually support the Pound, as some feel it would make a softer Brexit more probable. Still, a big question also remains as to how much we can actually trust these polls; YouGov indicators were famously a long way off in the last general election and EU referendum results.

The UK election is taking centre stage in the currency markets for now and the Pound is likely to swing according to which way the polls come in. I think traders will be reluctant to buy too heavily into Sterling at the moment (without a huge change in the polls towards the Tories) and are more likely to be skewed towards selling the Pound on any negative news versus buying on any positive news. This might change once the results start to come in towards the end of next week though as things become clearer.

As a result, the Pound has dipped back down to the lows we saw last Friday, with GBP/EUR around an 8-week low and GBP/USD close to a 5-week low. The next major figures we have are US employment numbers out on Friday afternoon.

Sterling bounces on retail sales numbers

Sterling has just bounced higher following some solid UK retail sales numbers.

Retail sales grew by 2.3% in April versus an expected 1.1% increase. This is a good figure for Sterling and shows that even with higher prices and the uncertainty over Brexit that consumer demand isn’t as sluggish as many have predicted.  On Tuesday, data showed that UK inflation continues to surprise on the upside and yesterday UK job figures were fairly solid, all of which further adds support to the Pound.

In other news, the USD remains on the back foot as political concerns over the Trump leadership have again come to fore. Traders have also pared back their expectations for when the Fed will next hike interest rates, following a raft of less impressive data releases.

As a result, the market has just popped over the 1.30 mark against the USD, which is now trading at the highest levels since September last year. The GBP/EUR is also climbing back up (a cent up from yesterday’s low) and recovering some of the ground we lost over the last few days.

Pounds slides as no additional members vote for rate hike in May

Sterling has just slipped after the Bank of England voted 7-1 to keep interest rates on hold this month.

Market commentators believed there was a small chance that other members would join Kristin Forbes in voting to hike this month, but they were left disappointed after no-one else dissented. Clearly they feel that there is less threat from inflation shooting well above their 2% targets and they are likely to reiterate that the increase in prices is down to temporary/transitory factors (such as strong pound and increased oil prices).

The recent strength in Sterling and drop in oil prices, which should both bring prices back down, are more than likely to have been the main reason members maintained their hold votes. Also the upcoming UK election and then subsequent Brexit negotiations only add to the uncertainty which makes a rate hike inconceivable at this time. It therefore seems unlikely they will change rates before the end of this year (and possibly not even next year), which makes Sterling less attractive to investors seeking higher yields.

As a result, the GBP/USD has dropped nearly 1-cent from yesterday’s high and trades as a 1-week low. The GBP/EUR lost nearly 1-cent upon release from yesterday’s high, but remains at reasonably healthy buying levels.

Next up we have Carney due to speak shortly at the quarterly inflation report press conference and then key US inflation figures tomorrow afternoon. From a Euro perspective, eyes will be focusing on ECB comments and clues as to their next monetary policy moves.