DUP Deal Done, Next Up – Queens Speech

5 July, 2017

Simon Eastman

Theresa May managed to agree terms with the DUP earlier in the week, alongside a £1.5 Billion pay out which obviously helped smooth the deal over.

Now the focus turns to the results of the past weeks debate on the Queens Speech and as to whether May will get the backing of parliament to carry out the suggested changes to legislation announced last week. If she does, then she can rest easy knowing she will return after the summer and be able to carry on with the job in hand, but if she doesn’t get the backing of MP’s, this could spell disaster and will almost certainly mean calls for another General Election.

For the pound, this will also cause devastation, sending the already troubled currency into a nose dive as more political uncertainty will add to the recent woes seen over the last week. It was only yesterday the pound saw any kind of respite as the Bank of England governor Mark Carney made hawkish comments at the ECB Forum that debating interest rate hikes in the UK, is necessary as the UK approached running at full capacity and this will be considered over the coming months. This is in stark contrast to comments last week, but in line with expectations following the most recent BoE meeting where the vote to change interest rates rose for 1-7 to 3-5.

The pound rallied a cent and a half against the single currency off the comments and nearly 2 cents against the US dollar, which has been feeling the pinch lately from a stronger euro, which has been helped by a more relaxed sentiment towards monetary policy by ECB president Mario Draghi.

Apart from the ECB Forum and the raft of key speeches by central bankers, there was little for markets to go off, but clearly any data wouldn’t have mattered anyway. Today is not going to be much different it seems with a few mediocre releases from the UK with mortgage data and money supply, coupled with consumer sentiment and confidence figures for the EU. German inflation also figures at lunchtime followed by the high profile US GDP at 1.30pm. This is the main release for the day, but could well be overshadowed by the results of the Queens Speech debate which we expect before lunchtime, but the time has not been disclosed as of yet.

For those not wishing to gamble on what could be a hit and miss result for the government, it would be prudent to trade any requirement early on this morning so make sure to call the team first thing to avoid what could be a volatile time. We have learnt of late, what is hoped and expected to happen, often doesn’t and with talk of Conservative in-fighting and displeasure at the DUP deal, we cannot write off the PM will not get parliament backing.