-
Fears over hung parliament continues to damage pound
-
YouGov shows Tory lead down to 4 points
-
Fears over Chinese monetary tightening pushes stock markets lower
-
Dollar supported ahead of the FOMC
We have warned since the beginning of the year that Monday trade for sterling is likely to be a painful experience and yesterday was no exception.
Sterling dropped over a percentage point against the dollar and by 0.75% against the euro as yet again another opinion poll suggested that the general election is likely to end in a hung parliament. Of course, this leads to the belief that no overall consensus in government means no clear decision making on fiscal issues and subsequently traders mark down the pound. We see no reason to change our wariness of Monday trade until after the election.
GBP was not helped by comments from Kate Barker, external member of the MPC, who warned that the UK may see another quarter of negative GDP before the year is out.
If sterling was the clear loser in trade yesterday then the dollar was the clear winner. Fears over monetary tightening in China (as explained in last night’s podcast) led to stock market falls around the world yesterday in turn strengthening the dollar. The greenback was also helped by a poor housing reading that saw risky assets slip further.
Today’s data highlight is the Fed decision at 18.15 GMT. The dollar is likely to remain supported as we head into the meeting although we expect no change in policy or language. We do expect that the lone dissenter from the previous meeting, Hoenig, will continue against the ‘extended period’ language. We also have German ZEW today which should show economic sentiment falling in Germany; a move lower for the euro as a result is expected.
Latest Exchange Rates At Time Of Writing
| Indicative Rates | Sell | Buy |
| GBP/EUR | 1.0974 | 1.1 |
| GBP/USD | 1.5008 | 1.5031 |
| EUR/USD | 1.3661 | 1.3682 |
| GBP/JPY | 135.69 | 135.98 |
| GBP/AUD | 1.6419 | 1.6443 |
| GBP/NZD | 2.133 | 2.1361 |
| GBP/CAD | 1.5282 | 1.5314 |
| NZD/USD | 0.7028 | 0.7049 |
| GBP/ZAR | 11.1 | 11.15 |
| USD/ZAR | 7.3908 | 7.4288 |
| GBP/PLN | 4.257 | 4.2852 |
| EUR/JPY | 123.42 | 123.89 |
Rates are dependent on amount transacted.
