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May 2017

Sterling holding up ahead of elections

Published: Tuesday 02 May 2017

  • Sterling holding up ahead of elections
  • Euro stronger on French election expectations and rumours of Greek deal
  • Aussie interest rates on hold
By David Johnson
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I hope your Bank Holiday weekend was a good one in spite of the spotty weather in the UK. We return to our desks amidst a swathe of data and some interesting exchange rate manoeuvres.

The Euro is holding its own ahead of the French Presidential elections which are forecast to produce Emanuel Macron as France’s next president. Mind you, we all know how accurate polls have been of late. Nonetheless, the Euro-USD exchange rate is up around $1.09. This week brings a raft of EU and US data, so volatile conditions will ensue and it starts with the EU unemployment rate which is forecast to be marginally better (but still dismal) at 9.4%. There are rumours circulating that Greece has reached a bailout deal with the EU and International Monetary Fund (IMF), so we will see what comes from the factual news on that. If it is true, there is another reason for the Euro to strengthen.

Yesterday brought some disappointing US data and the USD is still on the back foot. The US data diary is conspicuous by its absence today but the rest of the week is anything but quiet on that front. After a slew of manufacturing, service and retail data, a no-change decision from the Federal Reserve, the week will culminate in the US employment report. That is expected to be quite mixed data, so we could have a lively few days on our hands. Overall though the USD is weakening.

Sterling has also made ground against the USD. The polls (see previous sarky comment) suggest Theresa May is on course to make significant gains and that is still; being seen as a positive for the Brexit negotiations. The naysayers would have you believe otherwise. Nevertheless, the UK data has been generally positive but showing signs of a slowdown in the pace of growth. Having said that, this morning’s release of factory sector growth data in the Purchasing Managers’ Index (PMI) index showed the fastest pace of growth in 3 years. This week brings local government elections in the UK and I am sure the press will try desperately to extrapolate the likely national election outcome from the results. Uncertainty is assured.
 
This week will also bring significant data from Canada with the employment report on Friday and from Australasia, with New Zealand’s employment data tonight, Australia’s trade data tomorrow and we already had a decision to leave interest rates on hold from the Reserve Bank of Australia. They spoke of fears over the hangover from a decline in the mining sector but that is offset by regional housing market booms and increasing consumer debt. Can’t cut rates and can’t raise them either, in other words. The Australian Dollar is roughly where it was on Friday.
 
So May (the month and not the Prime Minister) seems set to continue the excitement we saw in April and maybe more as some of the things we have been waiting for come to fruition.
 
Enjoy
 

Advice

 
I told my friend that I thought she had over-plucked her eyebrows and they were now too far up her forehead.
She looked surprised.
 

For more information, infographics and the latest currency insights, visit www.halofinancial.com/news

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