Markets focus on UK election

Despite the UK stealing almost all of the headlines there is very little to report on in terms of economic releases; with no influential data released at all. In spite of the fact there was no discernible data released we witnessed great volatility, against the greenback the pound gained over 0.5% through yesterday’s trading session. The pair recorded lows of 1.5126(IB) before spiking throughout the day and recording highs of 1.5291(IB). The rate did retreat a little as the session came to a close but the pair was able to consolidate above the 1.52(IB) levels leading into the election. Similarly against the shared currency we observed vast movements throughout the day; however the pound lost ground and gave up gains as the rate moved away from the highs of 1.3572(IB) and scored lows of 1.3425(IB) as the session closed – recording a 1% loss as the pair traded in a 150pip range through the day. Reuters suggested British shop prices eased last month and Briton’s spending power is continuing to improve. The British Retail Consortium said ”retail prices in April were 1.9% lower than a year earlier, compared with the 2.1 percent fall in March which marked the largest decline in shop prices since the series started in December 2006.” The main take away from this is an improvement in British economy – something Cameron and the Tories would like all voters to see before casting their vote. Of course all eyes and ears will be focusing on in today’s election and polls before the results start to filter through in the evening and into the early hours of Friday morning. Reports suggest this will be Britain’s closest election for generations and will go down to the wire. According to some of the most recent polls Conservatives and Labour are tied on 35% of the vote each. With neither party predicted to win an overall majority, Briton’s deputy prime minister has said that if a stable government is not produced we could be called back to vote before Christmas.

The European economic calendar was also fairly light yesterday with only market moving data to be released being the European retail sales; expected at -0.7% a negative reading of -0.8% was scored. Despite this reading falling short of the mark the bloc currency was able to gain against both its’ major counterparts. As mentioned earlier in the report the euro gained 1% against the pound and gained over 1.3% against the dollar. EUR/USD was able to climb from lows of 1.1174(IB) and able to recapture the 1.13(IB) handle and consolidate above this level, when play came to a close. Of course all market participants are monitoring the on-goings in Greece on a day to day basis especially as the next payment to the IMF is looming ever closer. Not only will the focus be on whether the €750m can be fulfilled but also at what cost to the Greek economy. Today also bring German factory orders; typically all data coming out of Germany has been bullish of late – it will be interesting to see if this trend continues.

The dollar remained soft through yesterday’s trading session losing further ground against both its major counterparts. The recent run of poor data continued with the ADP employment change for the month of April falling well short of the 200k consensus, scoring a disappointing 169k. This combined with EIA crude oil stocks change falling short of both the previous and expected score caused further damage to the greenback. More volatility can be expected as the week draws to an ends; this afternoon brings both continuing and initial jobless claims figures and of course Friday we will witness the unveiling of April’s non-farm payroll figures and the unemployment rate – any deviation from the expected scores will of course bring instability to the dollar currency crosses.