Analysis

Sterling has rallied from early April lows to trade at the highest level against the US dollar since the start of 2015 (YTD). In 2014 GBPUSD peaked at just below 1.72, then trending down to the April 2015 low of 1.4565. As the pair traded to the April lows, the media coverage was bullish on the US Dollar with the expectation of a June rate hike from the Fed, and bearish on Sterling with the UK election outcome uncertain. Fast forward to the middle of May, and the US Dollar has been on the ba…

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The pivotal US employment report, Non-Farm Payrolls is released by the Bureau of Labor Statistics at 13:30 (London) today. The statistical reading is released on the first Friday of each month to assist government policy makers, and is seen as a bellwether of the US economy. Fed Chair Janet Yellen has cited the data dependency for the Federal Reserve to vote to raise interest rates, adding further volatility to the release, for an already pivotal number. The ADP employment report…

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Sterling surged as the exit polls were released last night, will the unexpected forecast that the Conservative Party would gain an even larger share of seats. The opinion polls prior to the election had the Labour and Conservative Party tied, however the Tory’s support has come through at the ballot box. The number of seats required to have an outright majority is 326, the initial exit polls estimated 316, with the latest view being around the number for a clear majority. T…

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Initial reaction in the FX market is that Sterling surged against the US Dollar and the Euro. The BBC exit polls released at 10pm (London) estimates that the Conservative Party have gained a larger amount of seats than had been estimated, approximately 316, meaning that they are the largest party. The Tory’s wouldn’t have enough seats to have an outright majority (326 seats), however the market’s reaction is that they believe the Conservatives will hold power in some form o…

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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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