British Pound: Politics weigh against Euro – Deutsche Bank

FXStreet Insights Team FXStreet

Deutsche Bank’s Shreyas Gopal reiterates a long EUR/GBP stance after United Kingdom (UK) local elections, arguing that UK political uncertainty is likely to persist through summer. The Pound (GBP) had traded calmly despite a surge in UK political headlines until news about Andy Burnham’s potential path to Prime Minister triggered a sharp move. Gopal estimates EUR/GBP risk premium has risen but not yet reached last year’s pre-Budget extremes.

UK politics lifts EUR/GBP risk premium

"Our main weekend conclusion following the UK local elections was that political uncertainty was set to linger in the background - if not deepen - over the summer, and we stayed long EUR/GBP as a result."

"To that end, this week had already seen the highest frequency of UK political headlines this year, but until Thursday evening the pound had remained comparatively calm."

"Our measure of the risk premium in EUR/GBP has climbed back north of 2% after this evening's spot move, but of course is based on rates pricing from Thursday close before the market-moving headlines."

"From here, and purely for illustration, one combination of market moves that would take the risk premium back to its widest pre-Budget levels would be a further rally in EUR/GBP to 0.8775 in conjunction with a 15bp underperformance of UK (front-end) rates (vs EUR) from Thursday's close."

"As a result, we would expect the FX vol market to place some event weight around potential dates for the by-election (potentially mid-June to early July)."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD surges to multi-day peaks past 1.3250

GBP/USD leaves behind Friday’s small pullback and advances past 1.3250 level, or five-day highs, on Monday. Cable’s upside follows extra losses in the Greenback, while traders continue to assess the geopolitical front and upcoming key events.

EUR/USD pops to daily highs near 1.1430

EUR/USD starts the week on a positive note, climbing to as high as the 1.1430 zone, or daily tops, on Monday. The pair’s recovery comes in response to the broad-based US Dollar weakness, while investors continue to monitor developments from the Middle East ahead of the beginning of the ECB's annual forum.

Gold struggles to attract investors

Gold remains under marked selling pressure, holding on just above the key $4,000 mark per troy ounce at the beginning of the week. The precious metal reverses two daily advances in a row as renewed effervescence in the Middle East revive inflation concerns and bolster Fed rate hike expectations.

Bitcoin four-year cycle: BTC risks 75% drawdown with four months of bear market still ahead

Bitcoin price continues to trend downward below the $60,000 support zone after losing over 50% of its value since the $126,199 high in October. Bitcoin’s four-year cycle, measured from cycle tops to bottoms, suggests that four months of a bear market are still ahead.

Just like Fed, is BoJ’s independence under threat?

When talking about central bank independence, most of the focus has been on Donald Trump’s pressure on the Federal Reserve. But a similar story, a quieter one for now, seems to be happening on the other side of the Pacific: Japan’s government may be testing the Bank of Japan’s independence.

Kevin Warsh isn't expected to say much in Sintra: That's exactly why markets will listen

Financial markets could find an important catalyst in the enchanting, fairytale-like landscape of Sintra this week. The ECB Forum will, as it does every year, gather the crème de la crème of central banks. The new boss at the Fed, who has clearly said that the Fed should stop explaining everything, will need to talk – and traders should listen.