UK: Things about to get tougher for PM May - BBH

Sandeep Kanihama FXStreet Contributor

Things are about to get tougher for UK Prime Minister May, who is carrying on as if the Tories still enjoyed a majority, explains the analysis team at BBH.

Key Quotes

“The DUP is reportedly seeking an increase of about GBP2 bln in government spending on infrastructure and National Health Service for their support of a minority government (which means no ministerial portfolios for DUP MPs). The Tories themselves seem to be jockeying for position behind the scenes to succeed May. Depending on which report you read, Hammond, Davis, and/or Johnson are quietly maneuvering, not wanting to seem too eager.”

“Meanwhile, Labour and the Lib Dems are reportedly considering the more than 70-year old convention that the House of Lords refrains from blocking or significantly amending laws that implement the governing party's manifesto. How can the Tory's manifesto now have the same gravitas as then the Tory's had a majority?”

“In addition to this fluid, yet fractured, political situation, we seemed to learn yesterday that the BOE Governor and its chief economist are odds about the outlook for the UK economy, and the urgency by which the accommodation provided last summer should be removed. Haldane suggested he nearly voted for a hike last week. That would have made it a four-four tie. The odds of a rate hike before the end of the year have risen but does not appear to be the most likely scenario (still below 40%, interpolating from the OIS). UK high frequency data in the run up to the next BOE meeting, which is in August, may have more impact in the market than is usually the case.”

Author

Sandeep Kanihama

FXStreet Contributor

Sandeep Kanihama is an FX Editor and Analyst with FXstreet having principally focus area on Asia and European markets with commodity, currency and equities coverage. He is stationed in the Indian capital city of Delhi.

GBP/USD resumes downside below 1.3200

GBP/USD resumes its downside below 1.3200 in European trading on Wednesday. The pair remains vulnerable amid a broadly firmer US Dollar and chaotic UK political environment. The focus is now on BoE-speak for further trading impetus.

EUR/USD sits at yearly low near 1.1350 on USD strength

EUR/USD sits at yearly lows near 1.1350 in the European morning on Wednesday. The pair remains vulnerable to further declines amid a bullish US Dollar. The Greenback continues to draw support from hawkish Fed bets and US-Iran peace deal uncertainty.

Gold: Bears retain control as Fed rate hike bets continue to boost USD

Gold recovers slightly from a nearly two-week low, around the $4,050 region, touched earlier this Wednesday. The commodity, however, sticks to its bearish bias for the second straight day, and seems vulnerable to weaken further amid sustained US Dollar buying.

Dogecoin tests a key make-or-break point amid waning retail support

Dogecoin trades below $0.08000 maintaining a steady decline for the seventh straight week. The meme coin is losing its retail strength as DOGE futures Open Interest drops 10% in 24 hours, while institutional demand remains muted with zero inflows so far this week.

Tech rout weighs on US stocks as the USD clocks a fresh 2026 high

Major US equity benchmarks ended Tuesday’s session considerably in the red, with the Nasdaq 100 down 3.3%, the S&P 500 off by 1.4%, and the Dow Jones down 0.1%. Stocks were largely weighed down by tech amid doubts over the AI-driven rally; the Philadelphia Semiconductor Index slid nearly 8%.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.