Morning Call

The exit polls released by the BBC at 10pm (London) predict that the Conservative Party has gained a larger proportion of seats in the general election that was expected. BBC Exit poll (Survey by NOP/Mori) Conservative: 316 Labour: 239 Scottish National Party: 58 Liberal Democrats: 10 Plaid Cymru: 2 Green Party: 2 Other 10 UKIP: 2 FX Market reaction Sterling was bid on the release of the expectation that the Conservative Party…

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The final economic indicator on the health of the UK economy has beaten analysts’ expectations. The Markit / CIPS UK Services PMI reading for April is an eight month high; 59.5 vs 58.9 previously. The release will be a welcome to George Osborne, following on from Tuesday’s poor construction PMI, the weak manufacturing PMI and miss for preliminary Q1 GDP estimate. The services sector is the main component of the UK economy, with expansion in this sector significantly outwei…

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The latest statistical data from the UK has missed analysts’ expectations. The Markit/CIPS UK Construction PMI reading for April was 54.2 compared with 57.8 in March. The data follows the poor Manufacturing PMI for April and the weak Q1 preliminary GDP estimate. The Markit release highlighted that despite the slower rise in new orders, there was a robust pace of job creation, which has put further pressure on sub-contractor availability. The pressures on labour availability could…

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Monday is a public holiday in the UK (May Day), with the main equities market closed and liquidity expected to be reduced in those that are open. London is a major financial trading hub, today a significant proportion of traders (asset managers, equity flow traders etc.) not at their desk; expect volumes to be reduced. In the UK voters go to the polls in the general election on Thursday 7 May. The outcome is undecided, with the expectation that there will be no outright majority, requi…

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On Wednesday, the US preliminary GDP reading disappointed markets (0.2% vs 1% expected). Throughout the US trading session the USD weakened against the major currencies after the disappointing print. GBPUSD traded towards the highest level of 2015 (1.5550), trading to a session high of 1.54960. EURUSD was bid on the USD weakness, breaking firmly above 1.10, then 1.11 and currently 1.1230. FOMC decision At 19:00 (London) the FOMC rate decision was released, with as markets had exp…

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In the first half of April, GBPUSD traded to a new 5 year low (1.4530), with the US dollar bid and GBP weak on election fears. Fast forward a matter of weeks and cable is now trading above 1.5365 and EURUSD has rebounded from its race to parity, to trade over 1.10. The move is primarily a US dollar story, in the UK the general election is in eight days and the uncertainty over the future government remains. In Europe the fears of a Grexit remain, as the remaining funds in Athens are ne…

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The Office of National Statistics (ONS) preliminary reading for UK Q1 GDP data disappoints markets and misses expectations; +0.3% compared to a median estimate of +0.5%. In the fourth quarter of 2014, GDP was estimated to have expanded at +0.6%. The UK economy is the fastest growing in the G-10, with improving employment and record low inflation. The economy is at a pivotal point, as we exit a multi-year recession, though the headline reading is the weakest QoQ growth since Q4 2012.…

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The Bank of England has released the minutes of MPC meeting held on 8 and 9 April 2010. At the meeting the MPC members voted unanimously (9 -0) to leave interest unchanged at 0.50% and asset purchases (£375bn). Two of the MPC members regarded this month’s decision as finely balanced most likely Martin Weale and Ian McCafftery, who have previously dissented at the August 2014 meeting. The MPC remit is to target inflation at 2%, the most recent readings of CPI have been recor…

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Major analysts have released notes warning their clients that the minority government outcome from the general election on 7 May is “likely” to weaken Sterling. The most recent polls (YouGov) show the two major parties neck and neck. UBS along with Citi have said that the possible formation of a minority government will lead to a clear decline in the pound, at a time when Sterling has traded at a 5-year low. With voters heading the ballot box in just over two weeks, the exp…

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German Finance Minister Wolfgang Schaeuble issued a statement late last night in New York criticising Greece for backing out of agreed bailout reforms. He said that ‘nobody expects that there will be a solution’ to Greece’s drama by next Friday’s ECB meeting on 24th April 2015; this fully contradicts with the Greek Finance Minister Yanis Varoufakis’ comments last week when he said he was ‘very confident’ a solution would be reached. Greek offic…

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Sterling has traded to a 5 year low in the currency markets against the US dollar on the back of poor construction and production data released by the ONS. On Thursday the Bank of England’s MPC announced their decision to leave interest rates and quantitative easing unchanged as expected, with the pound weakening following disappointing trade deficit figures. Thursdays close was the lowest level for Cable since June 2010, in part due to a strong dollar combined with the weak UK d…

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The Office for National Statistics (ONS) released their figures for February showed that the trade deficit widen to £2.9 billion from £1.5 billion in January. The release highlighted that the trade in oil, the monthly deficit on oil was virtually unchanged at £0.7 billion in February 2015. Weak Pound The release from the ONS said that exports to the European Union were at the lowest on record (since 1998) in part driven by the strengthening pound versus the Euro…

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The UK is headed towards its closest general election in modern history, with voters going to the polls on Thursday 7 May 2015. The first past the post political system didn’t produce the expected majority government in 2010, with the same outcome expected next month. Parliament has been dissolved by the current PM, David Cameron, and the official campaigning period has begun. In reality the preparations for the election started 18 months ago, with the leaking of policies and pol…

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It is a public holiday in the majority of markets today for Good Friday. There some adjustments to trading hours with liquidity expected to the long holiday weekend. The pivotal US jobs report (Non-Farm Payrolls) will still be released today, in the unusual circumstances that the equity markets will have to wait till after the weekend to react. It is only the third time that the jobs report has been released on Good Friday. The US Department of Labor releases the monthly employment nu…

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