Sterling dropped a little yesterday when a YouGov poll suggested that the Tory party could fall short of a majority on June 8th
. This is further proof that the markets are keen for a decisive victory to aid the strength of Britain’s negotiating hand in the Brexit discussions. The EU has published a very detailed document outlining just how much Britain needs to fund when we leave the EU. I love a provocative opening negotiating stance, don’t you? Other than mortgage lending figures, there is nowt in the UK data diary today, so, once again, the Pound will be wafted around by political speculation. Currently, the GBP-EUR rate is in the €1.14 area and the GBP-USD rate is around $1.28.
We get a couple of interesting stats from the Eurozone today. The unemployment rate may have eased to 9.4%. That’s still appalling, but any improvement is welcome. We will also see the Eurozone inflation rate, which is forecast to have dipped, oddly enough. With energy prices rising, balanced against a strengthening Euro, maybe the forecasters have got their sums right, but there is scope for a mismatch between the fact and the forecast.
And the Euro-USD rate is also susceptible to volatility today with the Eurozone data and, from the US side, the Chicago Purchasing Managers’ Index (PMI) and the release of the Federal Reserve’s Beige Book. That regional view of the US economy can produce changes in sentiment as far as the Fed members are concerned, hence its ability to affect exchange rates.
Last night brought the Chinese Manufacturing Sentiment Index, which was better than forecast, and that has strengthened the currencies of China’s supplier nations. Those include Australia and New Zealand. The Aussie and Kiwi Dollars are both stronger this morning and the forecast for Australia’s Manufacturing PMI, due out overnight tonight, is positive. So further Aussie Dollar strength before tomorrow morning is a real possibility.
The Canadian Dollar also benefits if China – one of the big global users of raw materials – sees improvement in its economy. This afternoon brings Canada’s economic growth data. Rising growth is forecast; an annualised 2.9% compared to the previous 2.5%. That will be good news for the Canadian Dollar, which is already a little stronger this morning. Those who need to buy CAD in the short term may decide to trade early.
Have a great Wednesday… or is it Tuesday? Bank holidays always throw my head-calendar out of whack.
At the psychologist's office
A guy goes in to see a psychologist. He sits on the couch and says, "The problem is that I can’t seem to make any friends. Can you help me fatso?"